Jamus is concerned about COEs.
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#workersparty recently filed a motion on the cost of living in Parliament. We spoke about all the areas where Singaporeans are facing pressure: from more expensive utilities bills, to runaway house prices, to rising medical fees, and (of course) food. My contribution was to speak about rising transport costs. I focused on COE prices (especially for cars), because this has been contributing the most, in recent times, to escalating transport costs.
Some may wonder if COE prices are just the concern of elites. I don’t think so. Two in five households own a car. Many of these are just regular families, many with young children, for which wheels help get kids to classes, pull off grocery runs, and make work appointments. Others are those with an elderly or dependent with medical needs, for which a reliable ride becomes almost a necessity. Besides, pricey car COEs spill over into the cost of semi-public options, like taxis and rideshares, or low-cost alternatives, like motorbikes.
Importantly, like the other MPs, I proposed what I believe are structural solutions that will help alleviate cost of living concerns, not just additional handouts like the Assurance Package, which—as welcome as they are—only offer a short-term palliative. Why does this matter? Because this is really where an opposition voice really stands out. A vote for the incumbent PAP is for more of the same, an acceptance that the system, which has delivered ever-rising costs of living, does not need reform. What we’re saying is that, despite having served a solid purpose, more of the same no longer cuts it when the young worry about being able to afford their first flat, or young families a modest car, or lower-income households relief from high water and electricity bills.
For cars, the move that will make the most difference is to balance out annual vehicle quotas. For some befuddling reason, we’ve chosen to fix this quota at (more or less) the number of cars that were registered in the first decade after the system was rolled out. This has led to a frustrating cycle of feast and famine: in years where quotas are scarce (like recently), COE prices go through the roof; in years where quotas abound, prices plummet.
Incidentally, there was a chart in the recent Straits Times that shows this, vividly. The only puzzling element is the headline—“not just supply and demand”—when the data scream (as loudly as any social scientific data can) that it’s essentially all about supply. To ensure that quota reallocation doesn’t get frustrated by COE horsetrading (those with high-priced COEs in famine years get tempted to trade in their cars before 10 years, to take advantage of low-priced COEs in feast years, and vice versa), we should stop reimbursing trade-in COEs at face value.
There’s also a big demand component that has to be reckoned with: added demand from private hire cars (PHCs). Don’t get me wrong; I think PHCs are, on balance, a good addition to our national transport mix, and offer employment opportunities for certain groups. But undeniably, PHCs add fuel (pardon the pun) to the flame of demand, at least at the margin. The Ministry of Transport has denied this, saying that there has been no material increase in COE prices even while PHC demand has been stable.
This misses out an important point: what could have been (the so-called counterfactual). Would COE prices be even lower, had we removed PHCs from the Cat A/B pool? After all, the number of such cars have risen close to fivefold over the past decade. And unlike regular cars, their demand is almost entirely driven by commercial considerations, which would typically mean a greater willingness to pay higher COE prices than less well-off households faced with a need for a set of wheels. The upshot of this is, unsurprisingly, higher COE prices than otherwise.
As frustrating as this would be for erstwhile car buyers, there is a sensible solution to this: treat heavy-use PHCs the way we do taxicabs: have them draw on the Cat E (Open) pool, but pay Cat A/B prices. This keeps the demand pressure in only one category, which we can think of as a “penalty” category. This is where you would also place buyers of 2nd cars. Even if this group of buyers is small, their demand can escalate prices, due to their stronger purchasing power.
While we’re looking to contain demand, we should also question whether dealers should be allowed to bid for multiple COEs. There are good reasons why they should—the car-COE bundle they offer makes the car buying process simpler—but it has led to industry concentration. This, in turn, can contribute to higher costs of car ownership. It may be high time to consider whether buyers should be the ones bidding for COEs directly, with dealers only offering advisory services (perhaps for a fee).
Finally, it also makes sense to tweak the motorcycle category further. Bike COEs can provide an important outlet for private transport demand needs to be met. Those who ride bikes are often doing so for commercial reasons, and besides, bikes have a smaller road footprint.
All these are solid reforms to the creaky COE system. The government appears to have taken baby steps in this direction, with the “cut-and-fill” of quotas. But current moves have been too tentative, and the MoT has not committed to fully smoothing future quota supply (it’s too easy to temporarily “fix” the high-COE problem, and conveniently forget to press on with lasting structural reforms, once the price pressure eases. As explained, COE reform has to be a multi-pronged process).
The quota system with COEs has been an urban transport success, helping keep Singaporeans roads relatively jam-free, compared to other major cities worldwide. But it has begun to slowly unravel, and decisive measures are needed today to keep costs down.
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