Report of the
Vehicle Quota System
Review Committee
Published March 1999
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GOVERNMENT PARLIAMENTARY COMMITTEE
(COMMUNICATIONS)
2 Mar 99
Mr Mah Bow Tan
Minister for Communications
Dear Minister,
In February 1998, you announced that the Government would do a
thorough review of the Vehicle Quota System (VQS), following the
implementation of the Electronic Road Pricing (ERP) system and the new vehicle
tax structure. You subsequently appointed us, the Government Parliamentary
Committee (Communications), to undertake the review.
The Committee has now completed its work and herewith submits its
report. In arriving at our recommendations, we had also actively sought the views
and participation of the various interest groups, academics and members of the
public. In addition, we were ably supported by two resource persons, Mr Gerard
Ee, President of the Automobile Association of Singapore and Associate Professor
Phang Sock Yong of the National University of Singapore, and the Secretariat
provided by the Land Transport Authority.
We note that since its implementation in 1990, there has not been a
comprehensive review of the VQS.
In the course of our deliberations, we have come to the conclusion that the
VQS is an effective and necessary tool in the Government’s demand management
strategy. It has achieved the transport objective of effectively moderating the
vehicle population growth to 3% per annum since 1990. This has ensured that the
vehicle population grows at a rate that can be sustained by our road network
without unduly increasing traffic congestion. Many Singaporeans have asked
whether the VQS is necessary now that we have the ERP, especially since ERP
will be extended to other major roads in due course. The Committee is of the view
that replacing the VQS overnight would lead to an over-reliance on the ERP
requiring more extensive coverage or higher charges, and may impose an
unbearable burden on motorists. The Committee has therefore recommended that
a balanced approach be taken, that is, to retain the VQS as a complementary tool
to usage measures.
c/o Parliament House, 1 High Street, Singapore 179429
While the VQS has been effective in controlling the growth of the vehicle
population, there are areas that can be fine-tuned and improved. The Committee
has recommended that the Government review the allowable vehicle growth rate,
in tandem with the expansion of ERP and improvements to the public transport
system. It has identified three areas where the VQS can be improved — quota
formula and distribution, quota categories and bidding system. We recognise the
economic needs and legitimate aspirations of Singaporeans to own vehicles,
whether for business, personal transport or leisure. Our main recommendations
are to change the quota formula and allocation mechanism so that it will better
respond to demand and to the changing preferences of Singaporeans, and to merge
the four car categories into two. In addition, the Committee recommends that the
Government considers trying out the open bidding system in the Open Category.
These recommendations, if accepted, will make the VQS more dynamic,
transparent, fair and efficient.
The members of the Committee wish to thank you for having given us the
privilege of participating in this effort to improve our land transport policies.
5 March 1999
Mr Chay Wai Chuen
Chairman
Vehicle Quota System Review Committee
Dear
Thank you for your letter of 2 March 1999, and the Report of the Vehicle
Quota System (VQS) Review Committee.
Your Committee’s Report and its recommendations to improve the VQS is
timely. It will ensure that the VQS continues to serve its objective of keeping
traffic flowing smoothly on our roads. I am pleased that your Committee had
actively sought the views and participation of the various interest groups,
academics and members of the public in its review.
Your Committee's recommendation that the VQS should be retained as it
complements usage restraint measures such as the Electronic Road Pricing
(ERP) system is in line with the Government's approach. We will adopt a twopronged approach, balancing ownership and usage restraint measures. We will
shift from our current ownership biased system to a more usage-based one.
However, this shift will take place gradually as sudden changes are likely to
introduce instability in the market. The VQS therefore remains an important pillar
of our traffic management strategy.
The Government will consider the specific recommendations of your
Committee in the three areas — quota formula and distribution, quota categories
and bidding system, and give its response in Parliament when it convenes in
mid-Mar 1999.
I thank you and the members of your Committee, as well as the many
organisations and individuals, who have contributed to this Report.
Yours sincerely
COMMS 1/96
Page
EXECUTIVE SUMMARY
1
I.
INTRODUCTION
5
II.
APPROACH
6
III.
SCOPE OF REVIEW
IV.
V.
Terms of Reference 1
7
Terms of Reference 2
7
VEHICLE QUOTA SYSTEM AS A KEY PILLAR OF
THE GOVERNMENT’S TRAFFIC MANAGEMENT
STRATEGY
Retaining the Quota System
8
Methods of Allocating Quota
10
RECOMMENDATIONS TO IMPROVE THE VEHICLE
QUOTA SYSTEM
Quota Formula and Distribution Amongst Categories
11
Quota Categories
15
Bidding System
18
Role of Dealers
21
VI.
CONCLUSION
23
VII.
ACKNOWLEDGEMENTS
24
Page
ANNEXES
A. Feedback/Suggestions Received
27
B. Interest Groups and Academics who Submitted Feedback
and/or Attended the Dialogue Sessions
30
C. Management of Traffic Congestion
31
D. Brief on Vehicle Quota System
34
E. Chronology of Major Changes to the Vehicle Quota System
37
F. Quota Premiums from May 90 to Dec 98
39
G. Annual Quota for Certificates of Entitlement from May 90
to Apr 99
40
EXECUTIVE SUMMARY
Introduction
1.
In Oct 98, the Minister for Communications, Mr Mah Bow Tan, appointed the
Government Parliamentary Committee (Communications) to undertake a
comprehensive review of the Vehicle Quota System (VQS). The VQS Review
Committee (the Committee) was accordingly formed in Nov 98.
2.
The Terms of Reference of the Committee are:
3.
a.
To review the need for and effectiveness of the VQS as a key pillar of the
Government’s traffic management strategy; and
b.
To recommend improvements to the VQS so as to better achieve its
objectives in traffic management, with greater fairness and objectivity.
In the course of its review, the Committee actively sought and considered
feedback received from various interest groups, academics, the Feedback Unit’s
Transport Group and members of the public.
Singapore’s Traffic Management Strategy
4.
The VQS was implemented in May 90, a result of a study by a Parliamentary
Select Committee on Land Transportation Policy. It is one of the two principal
tools used by the Government to manage demand for road usage. Over the
years, we have refined the VQS to improve the system and in response to
feedback and the changing environment. With the introduction of the Electronic
Road Pricing (ERP) system, the new vehicle tax structure and the experience
gained over almost nine years of operations, it is now timely to embark on a
comprehensive review of the VQS.
VQS as A Key Pillar of Singapore’s Traffic Management Strategy
5.
The Committee noted that the VQS has effectively capped the growth rate of
the vehicle population at 3% per annum, compared with an average of 6.8% per
annum in the 3 years prior to the implementation of the VQS. Without the
VQS, given the aspiration for car ownership coupled with increasing affluence
from a buoyant economy, our vehicle population would have continued to grow
uncontrolled over the last 10 years. This would have had adverse consequences
1
Executive Summary
on traffic conditions on our roads. Traffic would have grounded to a halt and
our economic development and quality of life would have been severely affected.
6.
While alternatives to the VQS, such as the restriction of the availability of parking
places and the imposition of high parking charges could be used to curb vehicle
usage, they could lead to other undesirable consequences such as problems of
illegal parking or excessive cruising in search of a parking place, thus worsening
traffic conditions. Although the ERP offers an efficient and effective means to
manage the usage of vehicles, very high charges would have to be levied to
counter the unrestrained growth of vehicle population if the VQS were not in
place. The VQS thus remains the most effective and direct means of alleviating
traffic congestion through controlling the growth in vehicle population. There is
still a need for a balance between usage management and ownership restraint
measures to achieve optimal traffic flow. The Committee therefore recommends
that the VQS be retained as an effective means of controlling the growth of the
vehicle population at a rate that can be sustained by an expanded road network
within our land constraint.
7.
As the ERP system is progressively extended to cover other congested
expressways and arterial roads, and as the Government continues to invest in
improvements to the public transport system to make it a viable and attractive
alternative to private transport, the Committee feels that there is scope to review
the allowable vehicle growth rate, currently set at 3%. However, any change to
the vehicle growth rate must be sustainable and not increase traffic congestion
to an unacceptable level that is adverse to the economy and the environment.
Method of Allocation of Quota
8.
Aside from the current method of allocating the quota through competitive
bidding, other methods have previously been advocated. These include balloting,
queuing and allocation based on need. Having studied these methods, the
Committee concludes that competitive bidding remains the most efficient means
of allocation as the COEs are given to those who value the right to own a vehicle
most.
Improvements to the VQS
9.
The Committee next reviewed the detailed mechanism of quota determination,
quota categories, quota distribution and the bidding system; and its findings are
described in the ensuing paragraphs.
Quota Formula and Distribution Amongst Categories
10. The current formula for quota determination and distribution amongst the
2
Executive Summary
different categories are too rigid and do not respond to changing trends
and preferences for different vehicle types. Also, as replacement COEs for
de-registrations in a particular year are only recycled in the following year, the
one-year lag can result in a significant mismatch between supply and demand of
COEs that could have undesirable effects on quota premiums. The Committee
therefore recommends that the quota formula and method of distribution of the
quota to the various quota categories be revised. Yearly COE supply should be
based on the projected de-registrations for the same year. In addition, the quota
should be distributed amongst the categories based on a more dynamic mechanism
that reflects the latest preference for different types of vehicles. The proposed
mechanism, to be studied further by Government, is to distribute the quota for
the car and motorcycle categories based on the latest demand as indicated by
the proportion of vehicles registered in the respective categories in the preceding
six-month period. This quota distribution should be announced half-yearly.
11. However, the COEs for commercial vehicles should be determined as a category
by itself based on the projected de-registration plus allowance for growth. This
is so as commercial vehicles are used for businesses and business operators do
not usually substitute their commercial vehicles for cars or motorcycles.
Quota Categories
12. From the transport viewpoint, there should only be one quota category for all
vehicles, with the owners deciding how to use their COEs. However, the
Committee recognises that for social equity reasons and in order to keep business
costs low, the quotas for commercial vehicles and motorcycles should be kept
separate from that for cars. However, we can reduce the number of categories
for cars. While the merger of the car categories into a single category will provide
greater liquidity and reduce price distortions, the Committee noted that there is
still concern that those who can afford bigger luxury cars will outbid the smaller
car buyers. Hence, the merger of categories should be done gradually.
13. As an intermediate step, the Committee recommends the merger of categories 1
and 2, and categories 3 and 4 into two car categories - lower (1600 cc and below)
and upper (above 1600 cc). This will reduce the segmentation of the quota and
hence, some of the distortions caused by having categories with small quota size.
Merging some of the categories will also provide buyers with greater flexibility
in their choice of cars.
14. The Committee further recommends that the Open Category be retained as it
provides the flexibility for changes in demand for commercial vehicles, cars and
motorcycles. Removal of the Open Category will make the VQS unduly rigid,
especially since most of the COEs are non-transferable. Nevertheless, if a more
dynamic mechanism can be adopted to distribute the quota, the Government
can review the proportion of COEs to be allocated to the Open Category.
3
Executive Summary
Bidding System
15. The Committee noted that the repeated calls for a Pay-as-you-bid (PAYB) system
stemmed largely from the perception that people were driving up COE premiums
by submitting high bids in order to ensure that they could secure a COE. The
Committee however is of the view that the PAYB system is not necessarily
superior to the current system where all successful bidders pay the Lowest
Successful Bid (LSB) price. Academics who attended the dialogue session also
supported this view. Further, some feedback contributors had expressed concerns
about the PAYB system. For example, there is the “winners’ curse” whereby
most of the successful bidders would be discontented, as it is only human nature
to be unhappy that someone else had obtained the COE at a lower price at the
same tender. There is also greater incentive for collusion among motor dealers.
Furthermore, a study of the bidding patterns revealed that most of the bids
clustered around the LSB. The Committee therefore recommends that the
current uniform pricing method, where all successful bidders pay the LSB, be
retained. While there were suggestions to impose the PAYB system for the top
10% or 20% of bids, the Committee feels that there is no reason to always
penalise the top 10% or 20% bidders, especially when the bids may not deviate
significantly from the LSB.
16. Currently, the bids are submitted as closed bids, which are opened only after the
tender is closed. This system does not give individuals sufficient information on
the prevailing bid situation. Those who needed the COE badly could bid much
higher than necessary. More experienced bidders would probably make better
guesses in their bids. Others would have to depend on their luck. An open
bidding system that provides equal access of information to all players will enable
bidders to make more informed decisions on the bid amounts and place bids
only at the level sufficient to secure a COE at the prevailing market price. The
Committee therefore recommends that the Government try out an electronic
on-line open bidding system in the Open Category. This should be done only
after the detailed mechanism and proper rules have been established. The trial
will allow the Government to assess the efficacy of the system before deciding
whether it should be extended to the entire VQS.
Conclusion
17. The VQS should be retained as an effective tool to control the growth of the
vehicle population in Singapore. It complements other measures such as the
ERP. in ensuring that our roads, which are the economic arteries of Singapore,
continue to be relatively free flowing for the efficient movement of people and
goods. In making its recommendations to improve the VQS, the Committee has
aimed to improve its efficiency in allocating our scarce road space, while taking
into account social considerations.
4
INTRODUCTION
1.
During the Budget Debate in 98, the Minister for Communications, Mr Mah
Bow Tan, announced that with the rationalisation of the vehicle tax structure
and implementation of Electronic Road Pricing in Sep 98, a comprehensive review
of the Vehicle Quota System (VQS) would be conducted. Subsequently on 16
Oct 98, the Government Parliamentary Committee (Communications) (GPC)
was appointed by Minister Mah to undertake the review.
2.
The Vehicle Quota System Review Committee (the Committee), comprising
members of the GPC, was accordingly formed and convened its first meeting on
5 Nov 98. In addition, the Committee appointed two resource persons, Mr Gerard
Ee, President of the Automobile Association of Singapore, and Associate
Professor Phang Sock Yong from the Department of Economics at the National
University of Singapore, to assist the Committee in the review.
3.
The Terms of Reference of the Committee are as follows:
a.
To review the need for and effectiveness of the VQS as a key pillar of the
Government’s traffic management strategy; and
b.
To recommend improvements to the VQS so as to better achieve its
objectives in traffic management, with greater fairness and objectivity.
5
APPROACH
6
1.
The Committee held 9 meetings between 5 Nov 98 and 19 Feb 99. It also invited
feedback on the VQS from interest groups, academics and members of the public.
A total of 93 written submissions were received via fax, mail and the Internet.
A summary of the various feedback received is at Annex A.
2.
The Committee also conducted 3 dialogue sessions with interest groups, academics
from the National University of Singapore and Nanyang Technological University,
the Feedback Unit’s Transport Group and members of the public. A list of the
interest groups and academics that provided feedback and/or participated in the
dialogue sessions is at Annex B.
3.
The dialogue sessions were a useful forum for all involved to consider and discuss
the feedback received on how to improve the VQS. It also gave participants the
opportunity to gain better insights into some of the policy considerations that
guided the Government in implementing the VQS. At these sessions, a general
consensus was established that the VQS should be retained. This was because it
has been an effective tool in maintaining the growth of Singapore’s vehicle
population at a sustainable rate without leading to severe traffic congestion.
4.
All feedback received was considered carefully by the Committee in the course
of its review. Where appropriate, the Committee had incorporated some of the
suggestions in its final recommendations.
SCOPE OF REVIEW
Terms of Reference 1
1.
The Committee studied various traffic management measures adopted by cities
around the world, including Singapore, to manage traffic congestion. In appraising
the need to retain the VQS in view of the introduction of the Electronic Road
Pricing (ERP) system, it took into account the implications on traffic, land use
and ERP charges.
Terms of Reference 2
2.
The Committee covered the following key areas in its review of the VQS. In
reviewing these areas, the Committee sought to identify shortcomings and
recommend improvements to better achieve the traffic management objectives
of the VQS:
a.
Quota Formula and Distribution;
b.
Quota Categories; and
c.
Bidding System.
7
VEHICLE QUOTA SYSTEM AS A KEY
PILLAR OF THE GOVERNMENT'S
TRAFFIC MANAGEMENT STRATEGY
Retaining the Quota System
1.
In considering whether the VQS should be retained, the Committee noted that
all around the world, major cities are grappling with the problems of traffic
congestion. Increasingly, it is being recognised that simply expanding the road
infrastructure would not solve this problem. Countries are working on a range
of congestion management measures, either to reduce vehicle demand on the
transportation system or increase the system’s capacity to improve traffic flow.
2.
Among the strategies/tools used by various transport authorities to reduce
excessive travel demand and create more sustainable transport systems are:
Land use planning - integrate land use and transportation planning to
increase accessibility to jobs, shops and other facilities without increasing
the need to travel;
b.
Motorists to pay for the social and economic costs of travel through road
pricing, fuel taxes or higher parking prices; and
c.
Traffic bans such as licence plate restrictions.
3.
A brief discussion of some of the traffic management measures adopted by
different countries, including Singapore’s strategies, is at Annex C. Significantly,
the Committee noted that no country in the world has yet adopted a vehicle
quota system like Singapore’s to directly control the growth of vehicle population
and a usage management tool such as the ERP.
4.
The ERP gives us a more flexible and direct way of managing road usage. With
the ERP in place as an important tool in Singapore’s traffic management strategy,
the Committee deliberated on the following questions:
5.
8
a.
a.
Could we now de-emphasise ownership controls or even do away with the
VQS?
b.
What would be the impact on traffic conditions and ERP rates?
The Committee noted that during the period between 1975 and 1990, the growth
rate of the car population was as high as 12% per annum before the recession of
1985. In the 3 years prior to the implementation of the VQS in 1990, the
growth rate averaged 6.8% per annum. Since the VQS was introduced, vehicle
Vehicle Quota System as a Key Pillar of the Government's Traffic Management Strategy
growth has been capped at 3% per annum. Without the control on vehicle
growth, it is likely that a buoyant economy, coupled with the legitimate desire
for car ownership (its comfort, convenience, and the status associated with owning
one), would have led to an explosive demand for car ownership.
6.
Given the land constraint in Singapore, there is insufficient space to accommodate
a high level of car ownership. In fact, the land area currently taken up by the
road network is already about 12%, comparable to that used for housing (13%).
According to the latest survey by the Alliance Internationale de Tourisme1,
Singapore already has the second densest road network in the world. It has 4.7
km of roads for every square kilometre of land, second to Uruguay, with 4.9 km.
Belgium is third, with 4.69 km. Singapore is also the country with the highest
number of cars per kilometre of road - 163, compared to other countries like
South Korea (105), Thailand (89) and Germany (67).
7.
Given all these factors, if the VQS were to be discarded and we were to rely
only on road pricing to manage traffic congestion, ERP charges would have to
be very much higher than today’s rates (about $20 per day) in order to achieve
the same level of traffic restraint. A much more extensive coverage of ERP
would also be needed. These would have an adverse impact on businesses,
especially transportation or freight forwarding companies and retail businesses
in the Central Business District (CBD). Being recurrent and charged on a daily
basis, high ERP charges may be more unacceptable than a one-time high upfront
ownership cost.
8.
The Committee also examined other alternatives to the VQS, for example,
restricting the availability of parking places or imposing high parking charges.
These were found to have their own shortcomings, such as causing more illegal
parking or excessive cruising in search of a parking place, thus worsening traffic
conditions.
9.
The Committee therefore recommends that the VQS should be retained as a
tool to control the growth of the vehicle population at a rate that can be sustained
by expansion in the road network within our land constraint.
10. The Committee also noted that with the rationalisation of the vehicle tax structure
and the implementation of the ERP, the Government has announced its intention
to rely more on usage restraint measures, i.e. ERP, to manage congestion. In
addition, the Land Transport Authority (LTA) is also continuing its efforts to
improve the public transport system to encourage more people to take public
transport.
11. Taking into account the Government’s ongoing improvements to the public
transport system, expansion of the road network and a greater reliance on usage
restraint measures, the Committee recommends that the Government review the
1
The Business Times, Thursday, 1 Oct 98 - "Bumper to Bumper"
9
Vehicle Quota System as a Key Pillar of the Government's Traffic Management Strategy
allowable vehicle growth rate, which is currently set at 3% per annum, that can
be supported by our transport network without increasing traffic congestion to
an unacceptable level.
Methods of Allocating Quota
12. Next, the Committee reviewed the method of allocating the vehicle quota to
determine if there were more equitable alternatives to the bidding method
currently in use. The Committee considered 3 other methods of allocation which
had been advocated by some people:
a.
Balloting;
b.
Queuing; and
c.
Allocation based on need.
13. It noted that under balloting, success is determined by chance. Those who are
willing to pay for the right to register a vehicle will end up paying a premium to
those who are lucky in the ballot. The premiums thus accrue to private
individuals, whereas currently, they accrue to the Government Consolidated Fund
where they can be used for worthwhile public projects for the greater benefit of
the society. Similarly, in a queuing system, those at the end of the queue will
have to pay a premium to those ahead of the queue if they wish to get the car
earlier. Moreover, such systems can generate additional demand as those who
are not in need of a vehicle may also join the queue or ballot for the chance to
get a windfall. The other method of allocating the quota on the basis of need
would obviously not be feasible, as the definition of need is hard to determine
and its assessment would necessarily be more subjective than objective.
14. Thus, the Committee concludes that in a market economy, bidding remains the
most efficient and equitable means of allocation whereby people bid for the
right to register a vehicle and those who value the right most will obtain the
COE. In such a system, market forces of demand and supply will determine the
cost of vehicle ownership.
10
RECOMMENDATIONS TO IMPROVE
THE VEHICLE QUOTA SYSTEM
1.
2.
After having concluded that the VQS has been effective and should be retained,
and that the bidding system is the best way to allocate vehicle quotas, the
Committee next examined how the system could be improved to better serve its
objective in the Government’s overall traffic management strategy. This section
discusses the Committee’s review of the following features of the VQS:
a.
Quota Formula and Distribution Amongst Categories;
b.
Quota Categories;
c.
Bidding System; and
d.
Role of Dealers.
A brief write-up of the current VQS, accompanied by a chronology of significant
changes to the system and a graph on the quota premium trends since its
implementation, are at Annexes D, E and F.
Quota Formula and Distribution Amongst Categories
Present System
3.
At the start of each quota year beginning in May, the COE quota is set at the
number of vehicles de-registered the previous year, plus additional COEs to allow
for a x°/o growth in the vehicle population. The formula (for year N) is as
follows:
COEN = Dereg (N-1) + x Veh Pop (N-1)
where x has been fixed at 3% since the implementation of the VQS.
4.
Of the COEs from de-registered vehicles (replacement COEs), 25% are allocated
to the Open Category while the remaining 75% are returned to their respective
vehicle quota categories. For the additional COEs to allow for the 3% annual
growth, these are distributed to the various categories according to the vehicle
mix as at the end of the previous calendar year.
11
Recommendations to Improve the Vehicle Quota System
5.
Details of the annual COE quota for the various categories from May 90 to Apr
99 are at Annex G.
Committee’s Review and Recommendations
6.
The Committee feels that the current formula should be improved to address
the demand from owners who need to replace their vehicles as well as to be
responsive to changing preferences for different types of vehicles. Both the
recycling of replacement COEs back to the respective category of the deregistered vehicles and the distribution of the new COEs for 3% growth based
on the vehicle population in each category does not reflect market trends and
changing preferences for the mix of vehicles. In addition, the one-year lag
between de-registrations and the recycling of the replacement COEs is too long,
and could cause a mismatch between supply and demand.
7.
Feedback from various groups also highlighted the above shortcomings. In
addition, there was also general agreement at the dialogue sessions that wide
fluctuations in the year to year COE quota should be avoided.
8.
Thus, the Committee considered how the supply of COEs could be made more
flexible so that demand could be better met. Some of the suggestions included
setting the quota on a half-yearly or quarterly basis, taking into account the
demand for COEs. Indicators such as the number of bids received or total car
sales were cited as possible proxies for COE demand which could be included in
the quota formula.
9.
The Committee identified the following objectives in its review of the quota
formula and distribution:
a.
The quota supply should better reflect the demand arising from
registration of vehicles;
de-
b.
A dynamic mechanism should be put in place for the distribution of the
quota amongst the vehicle categories that would be more responsive to
changes in preferences and demand; and
c.
The quota formula should remain simple and transparent.
10. The Committee recommends that the yearly COE supply be computed based on
the projected vehicle de-registrations for that year i.e. the COE quota for year
N would be based on the projected de-registrations for year N, rather than the
current practice of using the actual de-registrations in the previous year (N-l).
LTA would be able to project the vehicle de-registrations for the year based on
past years’ trends and the age profile of vehicles that were de-registered. In
order to ensure transparency to the public, the method used in its projection of
the de-registration figure should be well publicised.
12
Recommendations to Improve the Vehicle Quota System
11. While this will remove the current one-year lag between vehicle de-registrations
and recycling of their replacement COEs, the Committee recognises that a
projection is at best, an estimate. The actual number of vehicles de-registered
would be affected by extraneous factors such as policy changes or economic
conditions. To accommodate this, an adjustment will be made in the following
year to correct the over- or under-estimation of de-registrations.
12. The proposed COE quota formula is therefore:
COEN = Proj Dereg N + 3%Veh Pop (N-1) + (Act Dereg - Proj Dereg) (N-1)
Where:
Proj Dereg N = projected de-registrations for year N
(Act Dereg - Proj Dereg) (N-1) = Adjustment factor to correct for under/overestimation of de-registrations in the previous year
13. This revised formula will remove the 1-year lag in the recycling of COEs and
better reflect demand arising from de-registration of vehicles. The Committee
also noted that the 1999 quota based on the revised formula would be lower
than what it would have been under the present formula. Hence, it recommends
that a one-off adjustment be added to the 1999 quota in making the transition
to the new formula.
14. With the quota formula revised as above, the Committee then considered how
the quota should be distributed to the respective vehicle categories. Currently,
the quota is distributed based on the de-registration and total vehicle population
mix as of the previous year. This does not accurately reflect the changing
preference of vehicle mix as the de-registration pattern and total vehicle
population mix reflects the demand pattern of the past. For example, a person
who de-registers a Category 1 car may replace it with a Category 2 or 3 car,
rather than another Category 1 car. Similarly, a motorcycle owner may replace
it with a car after scrapping.
15. The Committee is of the view that the quota should be distributed in such a way
as to better reflect the latest preference of motorists. One way is to pool the
COEs for allowable growth and replacements from vehicle de-registrations and
distribute the COEs to the various vehicle categories according to the latest
registration trends. This can be done by dividing the annual quota into two
half-yearly quotas and distributing the COEs amongst the categories2 based on
the proportion of vehicles registered in the respective categories in the preceding
six-month period.
2
Please refer to following section of the Report for the discussion on the setting of quota categories.
13
Recommendations to Improve the Vehicle Quota System
16. This mechanism would result in a more dynamic distribution of the COE quota
to better reflect the market preference for the different categories of vehicles.
It also allows the system to be more responsive to changing demand. The
registration pattern is chosen as a proxy for demand, rather than the total number
of bids received, because of its greater transparency and simplicity. In an ideal
situation, the bid pattern would have been the right indicator of demand.
However, the Committee recognises that if the bid pattern is used, the authorities
would have to contend with the problems of frivolous bids and manipulation of
bids. Any solution to deal with these problems, for example, discarding the
bottom 10% bids by classifying them as frivolous bids, would be arbitrary and
contentious.
17. However, the Committee noted that it would be necessary to examine the impact
of the mechanism on the quota and population growth of the respective vehicle
types. While such a mechanism could be applied to the motorcycle and car
categories, it may not be suitable for the commercial vehicle category. This is as
the commercial vehicles are used for businesses and it is not usual that a business
operator will replace his truck with a car or a motorcycle. The commercial
vehicle should therefore be kept as a separate category. Its quota will be set at
the projected number of de-registrations plus the allowable growth, less its
contribution to the Open Category.
18. The Committee therefore recommends that the Government further study its
proposed mechanism to achieve a more dynamic distribution of quota to the car
and motorcycle categories, taking into account the impact of the method on the
quota and population growth of the respective vehicle types, and the long-term
impact on the vehicle population mix to determine if there would be any adverse
impact.
Surge in COE Supply in Year 2000
19. Based on the revised formula for determining the annual COE supply, as
described in para. 12 above, projections indicate that a surge in COE supply
would occur in year 2000, followed by a sharp decline in the following year3.
Such swings in COE supply are undesirable as they could lead to instability in
prices. To avoid such wide fluctuations in supply, the Committee recommends
that this “peak” in supply be moderated by removing the excess of COE supply
in year 2000 over year 1999 (i.e. difference in COE supply between years 2000
and 1999) and re-distributing the excess COEs equally to the annual quota of
years 2000 and 2001.
3
14
This is an irregular phenomenon caused by the large number of vehicle owners who paid the relatively low prevailing quota
premium in 1990, when the VQS was first introduced, for a 10 year COE. These COEs will be expiring in year 2000.
Recommendations to Improve the Vehicle Quota System
Quota Categories
Present System
20. Currently, the COE quota is segmented into 7 categories - Categories 1 to 4 for
cars, Category 5 for commercial vehicles, Category 6 for motorcycles and Category
7 is the Open Category. This segmentation was included when the VQS was
introduced in 1990 in view of the strong public sentiments then that buyers of
small cars, motorcycles and commercial vehicles should not have to compete
and bid in the same category as buyers of big and luxury cars.
21. The COEs from the Open Category can be used to register any vehicle from
Categories 1 to 6. Its primary purpose is to provide the VQS with the flexibility
and responsiveness to cater to the changing demand for different types of vehicles.
Committee’s Review and Recommendations
22. The Committee considered whether there should only be one category for all
COEs, or whether only the car categories should be merged, leaving the
commercial vehicle and motorcycle COEs in their separate categories. Having
only one car category was strongly supported by some academics, as it is
economically more efficient. However, feedback from the public indicated that
some segmentation should be kept for social equity reasons. Some had cautioned
on the likely increase in COE premiums if all the car categories were merged,
and the consequence of small car buyers being squeezed out by buyers of luxury
cars who were perceived to have higher bidding power, especially in a booming
economy.
23. The Committee also considered the suggestion for a single car COE category
with a scaling factor so as to address concerns that buyers of economy/utility
cars would be outbid by buyers of bigger luxury cars. The scaling factor could
be based on engine capacity or the Open Market Value (OMV) of the vehicles
to be registered. There was some feedback that such a system would be more
equitable as big car buyers should pay higher COE premiums than small car
buyers whereas under the current system, COE premiums of bigger and luxury
cars can be and has fallen below the premiums of medium and small cars.
24. The Committee noted that from the land transport point of view, there should
only be one category of COEs for allocation efficiency. All vehicle buyers will
then bid for their COEs in this category and use the COEs to register any type
of vehicle they desire. However, the Committee does not agree with the
suggestions to introduce scaling factors. It recognises that the VQS is primarily
a mechanism to allocate scarce resources, and is not intended to be a progressive
tax measure. Social equity and progressivity considerations are addressed more
adequately in the vehicle tax structure. For instance, the Additional Registration
15
Recommendations to Improve the Vehicle Quota System
Fee (ARF) of cars is fixed at 140% of the OMV. As the OMVs of the bigger
luxury cars are significantly higher than those of the smaller cars, their owners
have to pay higher ARF. The total car price of a luxury car thus remains higher
than that of a small car. In addition, cars with higher engine capacity pay higher
road tax rates than cars with smaller engine capacity.
25. In addition, the Committee is of the view that it is difficult to find a rational
basis for determining the scaling factors for each vehicle category. It also felt
that introducing progressivity considerations into the VQS would make it
unnecessarily complex and hinder its proper and efficient working.
26. The Committee further noted that both commercial vehicles and motorcycles
have different tax platforms from cars. They also cater to different groups of
motorists - commercial vehicles are used for business purposes while motorcycles
generally cater to the lower income groups. Therefore, the Committee
recommends that COEs for commercial vehicles and motorcycles remain in their
separate categories so that buyers of these vehicles do not have to bid in
competition with car buyers.
27. As for the car categories, there was general consensus that merging them into a
single category would provide greater liquidity and reduce price distortions.
However, in view of the concerns raised at the dialogue sessions that a single car
category without scaling factors might result in buyers of smaller cars being
“squeezed out” by buyers of bigger luxury cars, the Committee feels that, as an
intermediate step, the number of categories for cars can be reduced to two or
three. Some of the distortions caused by having categories with small quota size
will then be removed. Merging some of the categories will also provide buyers
with greater flexibility in their choice of cars.
28. The Committee studied various options for merging the car categories. Some of
these options (with their respective annual quota in brackets based on the quota
for current year 1998/99) are presented below:
a.
16
Two categories, with the division at 1,600 cc or 2,000 cc:
Option 1
Option 2
Lower Category
Up to l,600cc
(16,345)
Up to 2,000cc
(20,236)
Upper Category
l,601cc & above
(5,529)
2,001cc & above
(1,638)
Recommendations to Improve the Vehicle Quota System
b. Three categories as follows:
Option 3
Option 4
Lower Category
Up to l,000cc
(1,965)
Up to 1,600cc
(16,345)
Middle Category
1,001 to l,600cc
(14,380)
1,601 to 3,000cc
(between 3,891 & 5,529)
Upper Category
l,601cc & above
(5,529)
3,001cc & above
(less than 1,638)
29. An important consideration in deciding how to re-categorise car COEs is the
quota size in these new categories. A small quota in any particular category is
undesirable, as it is likely to lead to anomalies and fluctuations in COE prices,
and such categories can also be manipulated more easily.
30. On balance, the Committee recommends Option 1 i.e. to merge the current
Categories 1 (up to 1,000 cc) and 2 (1,001 to 1,600 cc) together, and Categories
3 (1,601 to 2,000 cc) and 4 (2,001 cc and higher) together, so that there will be
only two car categories - lower and upper. With the merger, taxis that are
currently grouped under Category 2, will come under the Lower Car Category.
The Committee further noted that the Government would have to
correspondingly adjust the computation of the prevailing quota premium (PQP).
31. Merging Categories 3 and 4 is a logical step as past trends show that their COE
prices have been generally quite similar. The quota premiums of Categories 1
and 2 have also been converging over the past 12 months, and there were
occasions when the COE price for Category 1 exceeded that for Category 2. In
considering the impact of merging Categories 1 and 2 on the smaller car buyers,
the Committee felt that merging would help address the concern with the
relatively small quota size and limited choices of car models in Category 1. At
times when there is a stronger demand for smaller cars, as seen recently, having
a larger quota will also help to moderate upward pressure on the COE price.
Also, some motor traders had indicated that there were many models of small
cars in the world which have not been imported for sale in Singapore because of
the small quota for Category 1. With a bigger quota size, dealers may find it
more viable to bring in more models of small cars.
32. Options 2, 3 and 4 are not satisfactory methods of re-categorisation as they would
lead to other problems. Option 2 will bring the buyers of lower end luxury
models such as the Mercedes E200 and some BMWs into the lower category,
with buyers of relatively smaller Suzuki Swifts and Nissan Sunnys. Option 3,
which involves only merging the current Categories 3 & 4, does not address the
issue of small quota size and limited choices in Category 1, while Option 4 will
lead to the creation of a category with very small quota size.
17
Recommendations to Improve the Vehicle Quota System
33. With regard to the Open Category, the Committee considered whether it has
served its purpose of catering to changing demand for different types of vehicles.
Although the COEs from the Open Category could be used to register a vehicle
in any category, past trends had revealed that it was predominantly used to
register bigger cars. This had resulted in higher growth of bigger cars at more
than 3%, at the expense of commercial vehicles and motorcycles.
34. However, more recently, the preferences of successful bidders of Open Category
COEs have shifted towards smaller cars. For example, in 1998, about 41% of
Open Category COEs were used to register Category 1 and Category 2 cars. In
some years, they have also been used to register commercial vehicles. Also, as
the COEs in the Open Category are transferable, they can also meet the urgent
needs of businesses or individuals to register a vehicle. The Committee therefore
concludes that the Open Category has, to a certain extent, performed its function
of allowing the VQS to cater to changing demand for different types of vehicles.
Removing the Open Category will make the VQS unduly rigid, especially since
most of the COEs are non-transferable. Therefore, the Committee recommends
that the Open Category be retained. If the Government decides to adopt the
more flexible and dynamic quota distribution method as proposed above, the
Committee further recommends that the Government review the proportion of
COEs to be allocated to the Open Category.
Bidding System
Current System
35. The current bidding system is a closed system. Prospective vehicle buyers will
submit bids for COEs based on the amount they are prepared to pay, without
any knowledge of the prevailing bids submitted by other bidders. All successful
bidders will pay the Lowest Successful Bid (LSB) price for the respective quota
category.
Committee’s Review and Recommendations
Auction Method
36. The Committee noted that there have been many calls to replace the current
LSB method with a Pay-as-you-bid (PAYB) system to discourage unduly high
bids. This debate had extended to the dialogue sessions where there were
differing views on the merits and demerits of a PAYB system. Most of the
proponents of the PAYB system believed that it would discourage buyers from
submitting excessively high bids to increase their chance of securing a COE.
However, the participants generally acknowledged that the PAYB system had its
own set of shortcomings. In addition, it was also pointed out during the dialogue
sessions that a PAYB system would lead to confusion among buyers, used car
18
Recommendations to Improve the Vehicle Quota System
dealers and finance companies arising from the differing values of cars of the
same model and age.
37. Significantly, the Committee noted that the calls for a PAYB system stemmed
from the perception that some parties and motor vehicle dealers were driving
up COE premiums by submitting very high bids to secure a COE. However, a
study of the bidding patterns revealed that this was not the case and that the
bids were converging towards the LSB. Generally, the successful bids clustered
within a price band of 20% to 30% higher than the LSB. Although there was
feedback to impose the PAYB system for the top 10% or 20% bids, the
Committee was not in favour of such proposals. It felt that it was not fair to
always penalise the top 10% or 20% bidders since their bids might not deviate
significantly from the LSB, especially in view of the recent trends of bids clustering
around the LSB.
38. In addition, the Committee noted the following concerns expressed by some
feedback contributors against a PAYB system:
a.
There could be an additional source of discontent among the successful
bidders, as no one liked the idea of paying more for the same item. Only
the ones paying the lowest premiums would be happy. This phenomenon
is commonly known as the “winner’s curse”;
b.
Some laymen might have difficulty in deciding on the right price to bid, for
fear that they might be penalised for bidding too high. This could lead to
greater reliance on motor vehicle dealers;
c.
It could establish a stronger incentive for collusion among motor vehicle
dealers to ensure that they bid close to the lowest successful price4; and
d.
A PAYB system would cause confusion in the motor vehicles trade and
vehicle financing industry.
39. The Committee therefore recommends that the current uniform pricing method,
where all successful bidders pay the LSB, be retained.
Open vs Closed Bidding System
40. Having established that the LSB method should be retained, the Committee
compared the merits of the current closed bidding system against an open bidding
system. The current closed system prevents an adequate flow of information to
all bidders, especially to individual bidders. Often, bids are made without
awareness of the relative demand for the COEs in a particular category. Those
4
During 1990-1991 when the Salomon Brothers US Treasury Bond scandal broke out, Nobel Prize laureate Professor Friedman
re-asserted his earlier opinion, first made in early 1960s, that the single strike price auction (same as the bidding system under
the current VQS) would have made the cornering of bonds less likely.
19
Recommendations to Improve the Vehicle Quota System
who needed the COEs badly could bid much higher than necessary. More
experienced bidders would probably make better guesses in their bids. Others
would have to depend on their luck. This has sometimes led to wide month-tomonth fluctuations in the quota premium.
41. The Committee is of the view that an open bidding system is more efficient as it
is more transparent and provides more information to bidders. This view had
the support of academics present at the dialogue session. An open bidding system
would also address the concerns of the advocates of the PAYB regarding
irresponsible bidding. Bidders will be aware of the current lowest strike price
for the COEs when they consider their bids. This will enable them to make
more informed decisions on the bid amounts and place bids only at the
appropriate level sufficient for the prevailing market situation. The Committee
feels that with the higher degree of transparency and enhanced access to
information under an open bidding system, individual bidders will be placed on
a more level playing field with the motor vehicle dealers as they would have
equal access to information on the prevailing bids. This should encourage more
individuals to bid for their own COEs, thus reducing the reliance on motor vehicle
dealers to bid for the COEs on their behalf. It will give an individual more
choice to bid for a COE before committing to buy a vehicle from a particular
dealer. The open system will also ensure that the final quota premium reflects
the true value that bidders place on the COE.
42. Having established the merits of the open bidding system, the Committee then
examined the feasibility of switching from the current closed bidding system to
an electronic on-line bidding system. Such an open bidding system, where bidding
can be done via the ATM tellers. Internet or telephone, can provide bidders
with information on the prevailing bids.
43. The Committee noted that electronic on-line auction has already been adopted
in other countries for different commodities and goods. In New Zealand and
Japan, for instance, such a system is being used for the auction of used cars.
Auction systems such as eBay and Yahoo! Auctions are also sprouting in
cyberspace. As e-commerce becomes more pervasive and widely accepted here,
electronic auction will gain more popularity in Singapore. The Committee is
satisfied that the current technology allows for a move into an open on-line
bidding system.
44. The Committee therefore recommends that the Government consider introducing
an electronic on-line open bidding system for the VQS. Issues such as system
security and integrity, accessibility, fairness and simplicity should be taken into
consideration in-establishing a business model for such an open bidding system.
The system should also build in safeguards to prevent collusion, market
manipulation and irrational running up of the bids.
45. Taking into account some reservations expressed about an open bidding system,
the Committee feels that a switch from the current closed system to an open online system would require further study. The Committee therefore recommends
20
Recommendations to Improve the Vehicle Quota System
that the open bidding system be tried out in the Open Category to allow the
Government to assess the efficacy of the system and the public’s acceptance of
the system.
More Flexibility in the Use of COEs
46. The Committee also considered a mechanism whereby COEs from a bigger car
category can be allowed to register cars from the smaller car category i.e. a COE
in Upper Car Category can be used to register a car in either the Upper or
Lower Car Category. This flexibility can allow buyers of smaller cars to bid in
the higher category if they perceive that the demand in the higher category is
lower. The converse where buyers of big cars bid in the lower category is not
allowed.
47. Greater flexibility will allow the car population to adjust to changing demand
for different mix, although the flow of COEs as proposed is unidirectional to the
lower category. When coupled with an open bidding system with greater access
to information on the prevailing bids, this flexibility can lead to more stable
COE premiums between the two car categories.
48. However, in the current closed bidding system, the benefit of this flexibility is
limited. Moreover, with the proposed merger of Categories 1 and 2, the quota
size in the proposed Lower Car Category will be much higher than that of the
Upper Car Category. It is therefore unlikely for a buyer to compete for a COE
in the Upper Car Category if he wants to register a car in the lower category.
Therefore, the Committee does not recommend adopting such a feature for the
closed bidding system. Nevertheless, the Government can consider incorporating
this feature if open bidding is implemented in future.
Role of dealers
49. In view of the strong public views on the role of the motor vehicle dealers in
COE bidding, the Committee considered several suggestions to limit these dealers
from bidding for COEs on behalf of buyers. There were even suggestions to
impose some form of penalty to discourage such practices. Some members of
the public held the view that these dealers were manipulating the bids and had
contributed to rising COE premiums.
50. A study of past bid patterns revealed that the majority of bids for all COE
categories were submitted by dealers on behalf of vehicle buyers. It is therefore
not unexpected that almost all the successful bids were submitted by the dealers
and consequently, the observation that motor vehicle dealers have contributed
to rising COE premiums. However, the Committee noted that besides Category
5 (commercial vehicles) and the Open Category, the COEs in the other categories
are non-transferable. In such instances, the bids must be submitted in the names
of the buyers. Hence for every bid submitted by the dealers, there must be a
genuine buyer.
21
Recommendations to Improve the Vehicle Quota System
51. The Committee recognises that the motor vehicle dealers have a role to play in
the car market and would naturally seek to secure and maintain their market
share. It is a common practice in today’s market that a buyer would be offered
a package deal by the dealer that includes the car price and the COE. Generally,
the package price would cost less than if the buyer were to secure his own COE.
With the package, car buyers are generally cushioned from increases in COE
prices as most dealers usually absorb the increase. Some of the other reasons
why buyers prefer to let the dealers bid on their behalf are:
a.
To save themselves the hassle of bidding and trying to assess how much to
bid;
b.
An individual who submits his own bid is required to have at least 50% of
the bid amount in his bank account as bid deposit. If he asks the dealer to
bid on his behalf, the COE deposit will be paid by the dealer; and
c.
If the buyer takes up a package with the dealer, the dealer will arrange a
financing package for the entire cost of the car, including the COE.
However, if he were to bid for his own COE, then he may only be able to
secure financing for the amount invoiced by the car dealer i.e. car price
without COE.
52. Thus, banning the dealers from bidding completely, as suggested by some people,
is not the solution. Vehicle buyers should continue to be given the flexibility of
choice. The Committee noted that there is still a group of people who would
prefer to let the dealers bid on their behalf for reasons of convenience and lower
cash outlay.
53. However, the Committee feels that this situation could be improved through the
provision of a better flow of information to the public. This could be achieved
by highlighting the various sources whereby information on the tender exercises
and their bids is available. From the dialogue sessions, it appeared that many
members of the public were not aware that information on the tender results,
including quota premiums, the number of bids received and the highest and lowest
bids were routinely released to the press and available on the LTA website (http:
//www.lta.gov.sg). Buyers whose bids are submitted by dealers can further obtain
information on the actual bid amount either through the Infoline or at LTA’s
office. A detailed listing of the successful bids is also available at LTA’s office
for public viewing. The introduction of open bidding will thus help to address
this issue by providing more information to better inform buyers.
54. The Committee also feels that it is not the business of the Government to dictate
to motor vehicle dealers their sale packages or whether they should sell their cars
at the same margin with or without the COEs. Its role is to ensure that the VQS
is a simple, fair and transparent system so that individuals are not deterred from
bidding for their own COEs. However, motor dealers should be more transparent
with their customers in explaining the conditions of their sale packages so that
buyers can make an informed decision on whether to bid on their own.
22
CONCLUSION
1.
The Committee has completed its review and concludes that the VQS should be
retained as it has worked well over the years to control the growth of the vehicle
population in Singapore. It complements other measures such as the ERP in
ensuring that our roads, which are the economic arteries of Singapore, continue to
be relatively free flowing in order to facilitate the movement of people and goods.
2.
In making its recommendations to revise the VQS, the Committee aims to improve
its efficiency in allocating our scarce road space, while taking into account some
social considerations. In summary, the recommendations of the Committee to
fine tune and improve the VQS are as follows:
3.
a.
For every quota year beginning in May, the COE quota will be set based
on the projected de-registrations for that year, plus COEs to allow for growth
based on the vehicle population as at the end of the previous year. There
will also be a correction factor to adjust for the under/over-estimation of
the de-registrations in the previous year;
b.
The distribution of quota to each category will be announced half-yearly.
The distribution method should be more flexible and dynamic to reflect
the latest preference of the motorists. The proposed distribution, to be
studied further by Government, is that for cars and motorcycles, the quota
could be distributed based on the registration mix in the preceding sixmonth period. For commercial vehicles, the quota would be set based on
the number of de-registrations plus allowable growth. The Government
should also review the proportion of COEs to be allocated to the Open
Category;
c.
Categories 1 and 2 to be merged to form the Lower Car Category (up to
l,600cc) and Categories 3 and 4 to be merged to form the Upper Car
Category (1,601 cc and above). Categories 5 (commercial vehicles), 6
(motorcycles) and 7 (Open Category) to remain status quo; and
d.
The current uniform pricing auction, where all successful bidders pay the
LSB, will remain status quo.
In addition, the Committee recommends that electronic on-line open bidding be
introduced on a trial basis to the Open Category after the business process has
been established. If the trial is successful, then open bidding should be introduced
for all categories.
23
ACKNOWLEDGEMENTS
1.
24
The Committee wishes to place on record its thanks and appreciation for the
interest and concern shown by the public, academics and interest groups in their
submissions on the VQS. The submissions and the discussions at the Committee’s
dialogue sessions made valuable contributions to the Committee’s understanding
of the complex problems and issues involved. Many of the ideas contained therein
stimulated the Committee’s deliberations and guided its recommendations. The
Committee wishes to thank the able support by our two resource persons, Mr
Gerard Ee, President of the Automobile Association of Singapore and Associate
Professor Phang Sock Yong of the National University of Singapore, and the
Secretariat provided by the Land Transport Authority.
Annex A
FEEDBACK/SUGGESTIONS RECEIVED
1.
The feedback/suggestions received by the Committee were classified into the
following categories:
(A) Quota Formula and Allocation
(B) Quota Categories
(C) Bidding System
(D) Miscellaneous
Quota Formula and Allocation
2.
Feedback/suggestions received in this category focussed mostly on how the supply
of COEs could better meet the buyers’ demand. Some suggested that the quota
should be set either on a monthly or half-yearly basis, taking into consideration
demand for COEs based on possible proxies such as volume of bids, sale or deregistration of vehicles. It was also suggested that the allocation of COEs from
de-registered vehicles to the Open Category be revamped.
3.
There were also suggestions to increase the quota for Category 1 on the grounds
that smaller cars were more efficient in terms of fuel consumption and they took
up less road space. Some asked for an increase in the total COE quota since,
with Electronic Road Pricing (ERP) in place, more vehicles could be allowed.
Quota Categories
4.
The suggestions received included various permutations of merging, splitting or
even removing some of the current categorisation, such as having 2 different
categories for motorcycles, splitting the commercial vehicles into goods vehicles
and buses or removing the Open Category completely. Someone also proposed
having car categories based on Open Market Value (OMV) rather than engine
capacity.
5.
It was also suggested that taxis should be re-categorised under Category 5 (Goods
Vehicles and Buses) as they were used for businesses while another suggested
exempting taxis from the VQS altogether as their number was already controlled
through taxi licences.
6.
Two new additional categories for cars were also proposed. One was for cars
used under the car-sharing scheme to promote car sharing, while the other was
for environmentally friendly vehicles to promote the use of such vehicles as they
were less harmful to the environment.
27
7.
There were also suggestions to merge some or all the car categories and introduce
scaling factors, based on the engine capacity or the OMV of the car. The scaling
factor would be applied to the quota premiums of the bigger cars, using the
current Category 1 or 2 as a base, so that the bigger car buyers pay higher COE
premiums than the small car buyers.
8.
There was one proposal to merge categories when the Lowest Successful Bid
(LSB) price for the bigger car category fell below that of the smaller car category.
For example, when the LSB for Category 2 was lower than Category 1, all the
bids received for Categories 1 and 2 would be merged and a new LSB determined
based on the total quota available for Categories 1 and 2.
Bidding System
9.
Some feedback has called for the allocation of COEs by balloting and imposing
penalties on those who did not utilise the balloted COEs within the COE validity
period, but most of the suggestions in this area were on the bidding method.
10. There was conflicting feedback on the Pay-As-You-Bid (PAYB) system. Some
believed that it would discourage high bids and lead to lower COE prices, while
others cautioned about the disadvantages and problems associated with the PAYB
system e.g. greater incentives for dealers to collude, confusion and uncertainty
among individual buyers on the right amount to bid, and among used car dealers
and financing companies on the value of the car.
11. A slight variation of the PAYB system was also proposed, i.e. to retain the current
system but penalise the top 10-20% bidders by making them pay their bid amount.
Miscellaneous
12. There were a few suggestions on the validity of COEs - to extend the validity
period, or to base the validity on usage/mileage (rather than years) in order to
complement the ERP system.
13. Other suggestions included allowing annual renewal of COEs, or abolishing the
need to renew COEs as it imposed an additional burden on motorists.
14. There were also suggestions to disallow financing for COEs, package deals offered
by dealers with COEs or to ban dealers from bidding.
Conclusion
15. All, the above suggestions were considered by the Committee in its review and
discussed at length during the dialogue sessions.
16. The Committee’s deliberations on some of the suggestions are reflected in the
28
main report. Some of the considerations that were taken into account in reviewing
these suggestions include : .
•
Fairness - the system must be fair to existing car owners, prospective
car owners and those who don’t own cars;
•
Efficiency - to ensure efficient allocation with minimal price distortion;
•
Flexibility - the system should not be too rigid and should be more
responsive to changing demands. It should also provide buyers with
flexibility of choice.
17. Where appropriate, some suggestions have been incorporated in the Committee’s
final recommendations.
29
Annex B
INTEREST GROUPS AND ACADEMICS WHO SUBMITTED
FEEDBACK AND/OR ATTENDED THE DIALOGUE
SESSIONS
Interest Groups
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
CityCab Private Limited
Comfort Transportation Private Limited
Finance Houses Association of Singapore
General Insurance Association of Singapore
Motor Traders Association of Singapore
Singapore Freight Forwarders Association
Singapore Lorry Owners Association
Singapore Motor Cycle Trade Association
Singapore Motor Sports Association
Singapore School & Private Hire Bus Owners’ Association
The Singapore Secondhand Motor Vehicles Dealers Association
TIBS Taxis Private Limited
Vehicle Rental Association
Yellow-Top Cab Pte Ltd
Academics
1.
2.
3.
4.
5.
6.
7.
8.
9.
30
Prof Chew Yong Tian
AP Chin Hoong Chor
Dr Chu Sing Fat
Dr Winston Koh
Dr Jennifer Mao
Dr Michael Li Zhi-feng
Dr Liu Yunhua
AP Toh Mun Heng
Dr David Lee
Annex C
MANAGEMENT OF TRAFFIC CONGESTION
Other Cities
1.
Congestion affects work trips and personal trips. It affects the movement of
people and the flow of goods to market. There are also other attendant social
costs. As families become more prosperous, one of the first things they want is
a car1. For example, in Mexico, private vehicle population increased by 30%
since 1991, while in Bangkok, before the economic crisis, extra 300 cars were
wheeled out each day. Even in developed countries such as America, about
198m cars, motorcycles and light trucks were registered in 1997. This was more
than one for every licensed driver.
2.
The growth in car population has led to an increase in trips generated by private
transport. This in turn results in traffic jams and other unpleasant consequences
e.g. air and noise pollution. In Britain, more than two thirds of journeys to work
are made by cars, up from 50% two decades ago while in America, 73% of
workers commuted alone by car in 1990, up from 64% in 1980. In EU, the
number of car passenger-km travelled has been rising by more than 2% per year
while other forms of land transport has stagnated. A growing body of evidence
proves that traffic congestion problems cannot be solved by simply expanding
the road infrastructure.
3.
Many countries are therefore working to manage their existing transportation
systems to improve mobility, safety, traffic flow and to reduce demand for vehicle
use. However, no country has adopted a quota system like Singapore’s to control
the growth of vehicle population, nor usage restraint of an extensive scale like
Singapore’s Electronic Road Pricing system.
4.
The various traffic congestion control and demand management measures can
be classified into 2 basic categories:
5.
1
a.
Demand side congestion management measures, designed to reduce vehicle
demand on the transportation system; and
b.
Supply side congestion management measures, designed to increase the
system’s existing capacity to improve traffic flow.
Among the strategies/tools to reduce excessive travel demand and create more
sustainable transportation systems are:
The Economist (5-11 Sep 98) “All Jammed Up” discussed people’s “love affair” with cars and the rapid growth in car ownership.
31
a.
Land Use Planning - integrate land use and transportation strategy to
increase accessibility of jobs, shops and other facilities without increasing
the need to travel. Curitiba in Brazil, for instance, has managed to reduce
use of private cars by channelling urban growth along public transit routes.
b.
Motorists to pay for the costs of travel. Some tools include:
c.
6.
•
Road pricing. However, there may be unintended impacts such as
increased travel on roads which are not priced;
•
Fuel taxes and/or pollution fees to reduce usage, conserve energy and
reduce pollution; and
•
Higher parking prices. The unintended side effects include increasing
illegal parking or length of trips (due to time spent looking for parking
places), thus worsening congestion.
Traffic bans - e.g. licence plate restrictions. However, this restriction can
be easily overcome by buying second car, which often tend to be cheap,
second-hand vehicles that are more polluting.
Some of the demand management methods adopted by different cities are2:
a.
Tokyo, Japan - Motorists must produce a certificate to show that they have
a parking space within 2km of their home before they are allowed to
purchase a car;
b.
Oslo, Bergen and Trondheim, Norway - Motorists are charged for entering
the centre via an electronic tolling system;
c.
Zurich, Switzerland - Parking for non-residents is limited to a maximum of
90 minutes. This forces motorists to park at the edge of town and use
public transport; and
d.
Athens, Greece - Odd and even-numbered cars are allowed into the city
only on alternate days.
Singapore
7.
In Singapore, the Land Transport Authority (LTA) adopts the following strategies
to manage travel demand and create a more sustainable transport system:
a.
2
32
LTA works closely with Urban Redevelopment Authority (URA) to
integrate urban development with transport planning. Having a proper mix
Financial Times (9/10 May 98) – “Measures to Keep the world’s motorists off the streets”
of development integrated with major public transport nodes will ensure
maximum accessibility for commuters to their residence, employment, leisure
and other social activities. This will reduce the need to travel or the length
of distance travelled;
8.
b.
To create a sustainable transportation system, LTA is continually improving
the public transport system to make it a more attractive and viable
alternative to private transport. Public transport is the most efficient mode
of people mover and is also more environmentally friendly;
c.
Ownership management measures such as vehicle taxes (e.g. Additional
Registration Fee, Customs Duty and road tax) to dampen the demand for
vehicles. The Vehicle Quota System (VQS) was introduced in 1990 to
moderate the growth of vehicle population; and
d.
Usage management measures such as levy of petrol duty, parking policies
and most importantly, road pricing (namely Electronic Road Pricing, and
previously, Area Licensing Scheme and Road Pricing Scheme).
This multi-pronged approach has allowed Singapore to keep the roads relatively
free flowing while supporting an increasing vehicle population.
33
Annex D
BRIEF ON VEHICLE QUOTA SYSTEM
1.
The Vehicle Quota System was implemented on 1 May 90 to regulate the growth
of vehicle population.
Allocation of Quota
2.
Under this system, the number of new vehicles allowed for registration is predetermined annually. The annual quota for Certificates of Entitlement (COEs)
is set at the number of vehicles de-registered the previous year, plus additional
COEs to allow for a 3% growth in the vehicle population. Of the COEs from
de-registered vehicles, 25% are allocated to the Open Category while the other
75% are returned to their respective vehicle quota categories. For the additional
COEs to cater for growth, these are distributed according to the vehicle mix as
at end of the previous year. The quota is advanced annually before the start of
the quota year in May.
Tender for a Certificate Of Entitlement
3.
34
To register a new vehicle, a person is required to bid for a COE under the
appropriate category as follows :Category 1
Small cars: l000cc and below
Category 2
Medium-sized cars: l00lcc to 1600cc & taxis
Category 3
Big cars: 1601cc to 2000cc
Category 4
Luxury cars: 2001cc and above
Category 5
Goods vehicles and buses
Category 6
Motorcycles
Category 7
‘Open’ (for any kind of vehicles)
4.
Bid applications are submitted through the Automated Teller Machines (ATMs)
of DBS, OCBC, OUB/IBS and UOB, POSbank’s Posbankers, Banks’ Intranet or
via the OUB Phonebank during the tender period. The tender exercise is usually
conducted from the 1st to the 7th of each month. 50% of the bid amount will
be deducted from the bidder’s bank account as tender deposit for the bid
application. Each applicant, except for companies and organisations, is permitted
only one bid in each tender exercise. Anyone found making more than one
application shall have all his applications rejected.
5.
Successful applicants need only to pay the lowest successful bid price - the quota
premium (QP). The applicant has to register the vehicle within the validity period
of 6 months for non-transferable COEs (Categories 1,2,3,4 and 6) and 3 months
for transferable COEs (Categories 5 and 7).
6.
Information on the bids submitted for each tender exercise is available from the
following sources, after the announcement of tender results:
a.
Press release and LTA website - Total quota, QPs in each category, total
number of bids received, number of successful & unsuccessful bids, highest
and lowest bids, unused quota and the Prevailing Quota Premiums (PQP);
b.
INFOLINE service - QP and PQP. Buyers who bid through their dealers
can check results of bidding and bid amount by keying-in their NRIC/
passport/company no and bid category; and
c.
LTA’s office at Sin Ming Drive - Same as (a) above. List of successful
bidders and distribution of bids received is also available for viewing.
Terms And Validity Of The Certificate Of Entitlement
7.
The COE will be valid for 10 years from the date of the vehicle’s registration. If
the owner sells his vehicle before the COE expires, the COE goes with the vehicle.
He will then have to bid for another COE if he wishes to buy a new vehicle.
Revalidation Of Certificates Of Entitlement For Existing Vehicles
8.
For existing vehicles registered before 1 May 90 and were less than 8 years old
as at 1 May 90, they were deemed to have been issued with COEs from the date
of registration of the vehicles. The remaining vehicles above 8 years old were
given two years’ grace period, at the end of which the vehicles must either be
scrapped or the owners must pay a prevailing quota premium (PQP) which would
allow them to use the vehicles for another 10 years. Since 1 Nov 98, the PQP is
the moving average of the quota premiums of the respective vehicle category
over the last 3 months.1
9.
When the COE expires at the end of 10 years, the vehicle owner is given an
option to revalidate it for 5 or 10 years by paying 50% or 100% of the PQP
respectively. The 5-year revalidation option carries the condition that the vehicle
must be de-registered upon the expiry of the 5-year extension.
10. The validity of the renewed COE will commence from the date of revalidation.
A vehicle owner may revalidate his COE before its expiry. However, he will
forgo the remaining unused period of the COE. No rebate will be given for this
unused period.
1
The PQP was previously a moving average of the quota premiums of the respective vehicle category over the last 12 months.
35
Rebate On Certificate Of Entitlement
11. For a vehicle registered using a COE from either Category 1,2,3,4,5 or 6, the
owner will receive a rebate on the COE premium which he has paid upon
scrapping or exporting the vehicle before its COE expires. This rebate is prorated to the remaining validity of the COE. However, if the vehicle is scrapped
for the purpose of export within 2 years of registration, the COE rebate is fixed
at 80% of the COE premium paid.
12. For a vehicle registered using a Category 7 COE, the COE rebate shall be
computed based on the COE premium of the corresponding vehicle category, or
the Category 7 COE premium, whichever is lower.
13. The owner of the de-registered vehicle may use his COE rebate to offset the
quota premium of a new vehicle to be registered in his name and if there is any
excess, against the registration fee and additional registration fee payable in
connection with the registration of that vehicle. The COE rebate can also be
used to offset the payment of the PQP for the purpose of revalidating the COE
of another vehicle in his name. The rebate can also be split and used in the
above manner for two or more vehicles.
14. Alternatively, the owner may wish to nominate another person or company to
take over the COE rebate. The COE rebate must be used within 12 months
from the date of de-registration of the vehicle.
Transferability Of New Cars
15. Vehicles registered using COEs from Categories 1 to 4 are only allowed to apply
for an ownership transfer after the first 3 months from the date of registration.
An Additional Levy (AL) on top of the transfer fees will be imposed if a transfer
of ownership occurs within the 4th to 6th month from the date of registration.
The AL is the positive difference between the quota premium of the relevant
car quota category at the point of transfer and the quota premium paid for the
registration of the car.
16. A transfer of ownership in the first 3 months from the date of registration is
allowed in the event of the death of the registered owner. However, the transfers
made are subject to AL.
36
Annex E
CHRONOLOGY OF MAJOR CHANGES TO THE
VEHICLE QUOTA SYSTEM
Date
Event
1 May 90
Implementation of Vehicle Quota System (VQS).
1 Sep 91
Start of a 1-year trial where COEs in categories 1,2,3,4,6, and 81
were made non-transferable and COEs in categories 5 and 7
remained transferable.
At the end of the trial, it was concluded that non-transferability did
not have a significant bearing on COE price increase. However, as
public was strongly in favour of retaining non-transferability, it was
decided that COEs for Categories 1,2,3,4,6 and 8 would remain nontransferable.
1 Nov 92
16,468 COEs were added to the quota for tender exercises from
Nov 92-Oct 93. Half of 16,468 was spread evenly over Nov 92-Feb
93, while the remaining was spread evenly over Mar 93- Oct 93.
These COEs were a result of the high de-registrations in Jan to Apr
92, as many owners chose not to renew the COEs for their vehicles
(older than 10 years) when the two-year grace period ended.
Taxi and rental car (SZ) operators were allowed to pay only 70%
of the relevant COE Quota Premiums since their vehicles had a
statutory life-span of 7 years.
Introduction of 5-year COE revalidation. Owners who chose the 5year revalidation must de-register their vehicles at the end of 5 years.
Dec 92
Proportion of recycled COEs allocated to Category 7 increased from
20% to 25%.
1 Apr 94
On-the-road-use cement mixers were brought under VQS.
Heavy Goods Vehicles registered using Category 5 or 7 COEs
obtained from Apr 94 tender onwards were no longer subject to
double quota premium. Instead, the registration fee of these vehicles
was raised from $15 to $14,000.
May 94
1
One time re-distribution of unused motorcycle COEs to other vehicle
categories as the demand for motorcycles were consistently less than
the allocated supply in 1992 to 1993. The surplus of 3610 was
distributed equally over 2 quota years - 94/95 and 95/96.
Category 8 was for Weekend Cars which was removed in 1994 when the Weekend Car Scheme was replaced by the Off-Peak
Car Scheme.
37
Date
20 Feb 95
Event
COE rebates for vehicles registered using Open Category COEs
were calculated based on the lower of Quota Premiums of Open
category or that of the respective vehicle category from the same
tender exercise.
COE rebates for vehicles de-registered within 2 years after
registration, for the purpose of re-export, were capped at 80% of
Quota Premiums paid at time of registration.
1 Apr 95
Start of 1 year trial on the recommendations of the Committee to
Discourage Double Transfers.
•
Transfer of cars, registered with category 1 to 4 COEs
obtained from tenders held during the one year trial were
disallowed in first 3 months of registration.
•
Additional levy (AL) (set at positive difference between
quota premium of the category at the point of transfer
and the quote premium used to register the car) was
imposed for transfers made within next 3 months.
•
3-month ban on transfer would not apply in the event of
death of car owner, but AL would apply.
At the end of the trial, it was shown that curbing double transfers
had not affected COE prices, which were ultimately determined by
supply and demand of COEs, and the level of affluence of COE
bidders. However, the measures were retained in view of public
support to curb double transfers.
38
1 Nov 95
COE bidding went fully electronic.
1 Nov 98
The Prevailing Quota Premium is computed based on the moving
average of the quota premiums of the respective vehicle category
over the last 3 months instead of the last 12 months.
Annex F
39
Annex G
40