Home News Featured News What the latest COE move means

What the latest COE move means




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By Vignesh Louis Naidu

On Monday, the Land Transport Authority (LTA) called for an urgent meeting with motor traders. Speculation was rife as to what this meeting was about. Many speculated that the government was about to announce further changes to the financing regulations in light of the pending change in COE categorisation. We found out soon enough what the announcement was about. LTA would now announce COE quotas once every quarter as opposed to the current half yearly announcements.

Most of the reactions online have not been about this change in the frequency of quota announcement but rather on the quota announced for this quarter. The COE quota is calculated based on a formula that allows for the replacement of deregistered vehicles and a very slow rate of growth. For the quarter starting in February there will be about 400 fewer COEs available for bidding.

The discussions invariantly point towards the unfair nature of the current COE structure and its inherent biasness towards the wealthy. Yes that is true. The market- based nature of the COE system only accounts for one’s ability to pay and not his needs. There are individuals for whom a car is not simply a want or desire but rather a basic necessity for a comfortable and dignified life.

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Instead of further expounding on the social equity aspect of car ownership, I would rather look at what the latest announcements really mean for the average Singaporean. Firstly, by announcing the quota every three months large fluctuations are minimised and this would lead to a flatter curve in quantity and by extension price. Having a more even distribution of COE quotas should lead to reduced speculative behaviour.

Many buyers now rush to make purchases in the last month or two of an existing quota for fear that the next quota would be significantly lower. LTA, when announcing the latest quotas, said that if it had applied the previous bi-annual formula the number of COEs available would have fallen by another 5 per cent.

Congestion argument

Secondly, this announcement shows that the government is standing firm on its view that congestion is bad for the economy and that to prevent congestion vehicular ownership needs to be regulated. It has adopted a market-based system of allocating a limited supply of cars, in the government’s view, a luxury good. No other country in the world makes car ownership as financially onerous as Singapore. If owning a car is unattainable for the masses it is necessary to ensure that the public transport networks are not only good but world class.

The government also has to accept that for many Singaporeans a good public transport network is not limited to comparisons with Tokyo, London, New York etc.; but also anchored to their memory of Singapore’s system back in the 80s, 90s and early 2000s.

Fare announcement

In a few days the Public Transport Council (PTC) will announce its decision on the application for a fare increase by the public transport operators. It seems very likely that the PTC will approve the fare hike but possibly not to the extent requested by the public transport operators. The Transport Minister has also announced on his Facebook page the assistance schemes that the government will roll out to mitigate the possible increase for lower income household and people with disabilities.

When submitting an application for a fare increase the operators generally cite increasing cost as their main argument. This is fair when one considers the increase in the cost of energy, a large part of their operating cost, in the last five years.  Earlier, the Minister also announced a carrot and stick approach in getting the operators to improve their service standards. I do not think it is fair that the operators are rewarded when a bus arrives ahead of schedule. How many of our bosses pay us more for showing up at work early? In the same announcement the new fine structure was also made known. Yes the amounts are large but they have to be seen in perspective.

Instead of imposing a fine when there is a service disruption or breakdown why not ban the errant operators from applying for a fare hike for a specific period of time. For example, an errant operator can be barred from applying for a fare hike for six months. I believe that this would be a much better stick than any fine.

Also, freezing out potential fare increases may lead to more breakdowns and service disruptions as the operators will put aside less money for things like maintenance cost. In such a situation the debate on renationalisation will certainly gain more traction.


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