The road ahead for COEs

SINGAPORE: With the Land Transport Authority (LTA) due to complete a review by the end of the month — on the feasibility of increasing the supply of Certificates of Entitlement (COEs) — analysts TODAY spoke to called on the authorities to re—examine the system to address its volatility and to ensure social equity, with one even urging an overhaul.

Most experts and observers felt that by and large, the system has worked. However, tweaks are in order, they said.

Suggestions include temporarily allowing motorists to sell their COE back to LTA at the market price, allocating a certain number of COEs to different income brackets, having a fixed quota of COEs every year and having an additional category for luxury cars.

As COE premiums hit record levels in recent months, members of public have questioned the 22—year—old system.

In a letter published on May 18, TODAY reader Chua Yao Kun argued that the COE system "has proven to be a blunt tool". Apart from contributing to inflation, he argued that the COE system has resulted in vehicle ownership being increasingly concentrated in the hands of the rich, rather than being allocated to activities that promote economic value. The letter has since garnered 1,700 ’likes’.

National University of Singapore transport researcher Lee Der Horng felt the COE system needs an overhaul. "The affordability (of a car) is not equal to the true desire or need to have a vehicle," he said.

One way to address the issue of social equity is to allocate a certain number of COE to different income brackets, said UniSIM School of Business urban transport management expert Park Byung Joon. Nevertheless, such a method is "easier said than done", Dr Park noted.

He added: "Who will evaluate the level of needs of each family and how? We may end up with having a bureaucratic monster, not necessarily better than COE system."

Pasir Ris—Punggol Group Representation Constituency MP Gan Thiam Poh, who is on the Government Parliamentary Committe for transport, concurred: "It will be difficult to assess whose needs are more pressing and it will be difficult to satisfy everybody."

Assoc Prof Lee suggested a balloting system. However, he noted that doing so could make the situation worse if it encourages the "entire population" to try their luck. "But then again, such things can be prevented much in the way the HDB has the rule that you can only sell your flat only after five years. If implemented for cars as well, it would ensure car owners know their responsibility and will have to take care of the car for the next five years," he added.

To address the volatility, Assoc Prof Lee suggested a more stable COE supply. Having a new category for luxury cars could also ensure that those who can afford it can pay more, he added.

HAS COE SYSTEM WORKED?

Overall, Dr Park believes the system has achieved its objective. "Without the COE system, the Singapore roads would become even more congested," said Dr Park. He pointed out that the current situation is due to the oversupply of COE between 2004 and 2008 — during that period, Singaporeans enjoyed relatively low COEs, he noted.

"The COE price is determined by the market force of supply and demand.. When supply decreases in such a huge number, it is not surprising that COE price drastically increased," he said.

Mountbatten MP Lim Biow Chuan, who is also on the GPC for transport, said the COE system has "worked to a certain extent".

"The question now is how it can be tweaked as people are feeling the pinch and there have been various requests and proposals," said Mr Lim.

Apart from the COE system, some MPs were concerned at the ease with which prospective buyers are able to finance their cars. These days, some banks are even offering on—the—spot approval for car loans.

Mr Lim suggested "cutting financing so that you do not allow people who cannot afford cars to leverage payments they may not be able to finance".

Ang Mo Kio GRC MP Ang Hin Kee cautioned against implementing "stop gap measures" which could throw the Republic’s long term plans "into disarray". The entire transport system should be looked at in its totality before any tweaks to the COE system are made, he stressed. —

TODAY