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Apr 3, 2010
Old formula doesn't mean more COEs
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I REFER to Mr Tan Jiaqi's letter, 'COE price hike: Govt not entirely right', on Wednesday.
Mr Tan asserts that the new formula for certificate of entitlement (COE) quota, which comes into effect this month, was one reason for the rise in COE prices in the recent bidding exercise last month.
Both the old and new COE formulas aim to replace deregistered vehicles through the COE supply. Under the old formula, the number of vehicles deregistered is based on projections derived from historical trends. The new methodology merely does away with the need to project deregistrations by basing the number of replacement COEs on the actual number of vehicles taken off the road in the most recent six-month period. In doing so, the new formula provides a COE supply that is more responsive to changes in vehicle deregistration patterns, and is not subject to errors in projection.
The change in formula in itself does not result in a significant change in COE quotas. If there is a trend of more vehicles being deregistered, then both the new and old formulas would provide for a higher COE quota. Likewise, if there are fewer vehicles being deregistered, the COE quota will fall regardless of the formula used.
The cut in the COE quota announced last month was a direct result of there being fewer vehicle registrations recently. It is wrong to conclude that if the Government had kept to the old formula, there would have been more COEs.
In its review of the COE formula, the Land Transport Authority sought the views of the various motor trading associations, which were generally supportive of the proposal. In deciding on the change, the Government took into account their feedback, to use a six-month recycling period to allow the industry time to adjust.
Phua Hooi Boon
Director (Land Transport Division)
Ministry of Transport
Old formula doesn't mean more COEs
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<!-- end left side bar --><!-- story content : start -->
I REFER to Mr Tan Jiaqi's letter, 'COE price hike: Govt not entirely right', on Wednesday.
Mr Tan asserts that the new formula for certificate of entitlement (COE) quota, which comes into effect this month, was one reason for the rise in COE prices in the recent bidding exercise last month.
Both the old and new COE formulas aim to replace deregistered vehicles through the COE supply. Under the old formula, the number of vehicles deregistered is based on projections derived from historical trends. The new methodology merely does away with the need to project deregistrations by basing the number of replacement COEs on the actual number of vehicles taken off the road in the most recent six-month period. In doing so, the new formula provides a COE supply that is more responsive to changes in vehicle deregistration patterns, and is not subject to errors in projection.
The change in formula in itself does not result in a significant change in COE quotas. If there is a trend of more vehicles being deregistered, then both the new and old formulas would provide for a higher COE quota. Likewise, if there are fewer vehicles being deregistered, the COE quota will fall regardless of the formula used.
The cut in the COE quota announced last month was a direct result of there being fewer vehicle registrations recently. It is wrong to conclude that if the Government had kept to the old formula, there would have been more COEs.
In its review of the COE formula, the Land Transport Authority sought the views of the various motor trading associations, which were generally supportive of the proposal. In deciding on the change, the Government took into account their feedback, to use a six-month recycling period to allow the industry time to adjust.
Phua Hooi Boon
Director (Land Transport Division)
Ministry of Transport
