TIME TO SCRAP THE UNNECESSARY COE SYSTEM
LTA's latest modification to the COE system is grossly inadequate and highly disappointing. It is therefore unsurprising that it has attracted much immediate criticism and disagreement from many quarters, ranging from industry experts to green campaigners and from media watchers to ordinary motorists.
There are many reasons why the COE system fails to provide an efficient, fair and stable method of easing traffic congestion.
Firstly, from its inception in 1990 till today, LTA used an auction system to allocate COEs. The inherent intention of any auction is to obtain the highest possible price for whatever that is being auctioned. Therefore, whichever the system of categorization of COEs, however the method of modification and whatever the secondary rules you have, the richer bidders will always be favored. The lack of social equity will remain. Merely labeling cars as an unnecessary luxury will not placate the frustrated aspirations of ordinary Singaporeans. After all, cars are actually not that expensive, but are artificially made expensive through high taxation and the imposition of a high ransom called the COE.
Secondly, the original purpose of preventing traffic congestion has been largely forgotten or ignored. Too much time and energy are spent tweaking the COE system. To ensure smooth flow of traffic, the first requisite is to control our car population. This can be easily achieved without resorting to expensive and troublesome COEs! For example, we can effortlessly freeze our car population tomorrow by stipulating that every new car registered must be accompanied by the de-registration of another vehicle by the buyer. First time buyers can only buy second-hand cars. Overnight, control of our car population is achieved without a single additional cent changing hands. This will be fair and make life better for everyone irrespective of wealth.
Thirdly, our excellent ERP system has not been fully utilized. To encourage the use of public transport and car-pooling, the quantum of ERP charges should be raised by a few multiples to prevent congestion in hotspots during peak hours.
Fourthly, the LTA had stressed repeatedly that the COE system is implemented solely to prevent traffic congestion and never to generate revenue. One wonders whether we should continue to trust LTA's word that the $50 billion collected through the COE system is purely incidental and unintended. Or will conspiracy theorists begin to feel that the continued failure of the COE system is cynically intended by design to ensure a smooth flow of revenue!
Over the last 23 years, much time, money and effort had been spent on implementing the COE system. Yet, our roads are still congested, prospective car buyers are still frustrated, many car dealers have gone bust, car owners are heavily burdened financially, and our inflation rate has been adversely affected.
Why do we continue to use this inefficient, unfair and unnecessary COE system, making life difficult for everyone?
"...we can effortlessly freeze our car population tomorrow by stipulating that every new car registered must be accompanied by the de-registration of another vehicle by the buyer. First time buyers can only buy second-hand cars.
ReplyDeleteAlthough I currently own a car and stand to gain if this is implemented, I feel that this suggestion is simplistic and by no means fair. How is giving existing owners perpetual entitlement to owning a car fair, especially to first time buyers? This is simply going to change the mad rush for COEs to a mad rush for 2nd hand cars and existing owners stand to reap a handsome profit if they already own a car. Do you think that the government will allow this? At least the revenue collected from the current COE system is going to the coffers and will be used for the common good of all.
Dear Victor, thanks for your comment. Let me clarify the following:
Delete1. When we judge a certain policy, we must not consider whether we would personally benefit from it or not. We should judge the merits of the policy according to the facts.
2. Saying that the proposal is simplistic is not a point against it. It fact, a good solution to any problem should be a simple one. So, thank you!
3. You seem to think that there is something wrong with "perpetual entitlement to owning a car". It is a basic economic principle that when you buy something, that is when you hand over money to a seller, the goods in exchange is yours perpetually. If something only belongs to you for a limited period of time, that is called a lease, eg, 99-lease property. So, how is it that your ownership of your car became a lease since 1990; I think there is a sleight of hand which careless Singaporeans have become conditioned to accept. Actually, that is the really unfair part of the deal.
4. First-time car buyers will not suffer any injustice as they have not bought any cars yet, and therefore are not car owners. They are not at any disadvantage, as like everyone else, they can buy second-hand cars and become car owners overnight. Once so, they will also own their cars perpetually. If they decide to upgrade later, like everyone else, they just need to scrap their cars and buy new ones from the authorized agents. There is no need for COEs. You pay the true market price undistorted by Govt policy.
5. There will not be any mad rush for second-hand cars as there is a large supply at second-hand car centers. Just visit the various centers for a good idea. In any case, it would be irrational for people to rush out to buy second-hand cars just to scrap them and buy new cars. Second-hand cars are at different ages and their usefulness and readiness for scrapping varies. There is a certain economic price to pay for buyying and selling second-hand or buying new cars, so buyers will usually weigh their options carefully before commiting to a certain course of action.
6. Pre-existing car owners reap no handsome profit as they merely continue owning their cars. But they know that the only way of buying a new car is to scrap their car or sell their car away and buy a much older car for scrapping.
7. Yes, the Govt needs revenue to run various social and national programs. But the LTA has repeated emphasized that the COE system is implemented not to collect revenue, but to allocate the right to buy a car and the right to keep you car beyond 10 years in an economically efficient way. THAT, OF COURSE, IS FALSE. Efficiency is the quality of achieving maximal results with minimal wasted effort and expense. If after 23 years, everyone is still unhappy about the COE system, that is poor results and wasted effort big time. If motorists had paid $50 billion over the last 23 years that the LTA declared that they actually have no intention of collecting, that is wasted expense.
8. So, the simplistic proposal of returning to the pre-COE days of 1989, but freezing our car population by requiring the scrapping of a car to buy a new car is THE efficient and fair way to car ownership in Singapore without increasing traffic congestion.
I especially take issue with Point No. 5 in your reply. (But that does not mean that I agree with all your other points. Let's just agree to disagree on them.)
ReplyDeleteAgain, it is simplistic... or should I use the term naive instead, lest it be again mistaken as a term of support, to think that there will not be any mad rush for 2nd hand cars. You have changed the playing field and you still expect that the various 2nd hand car centres to still have a large supply of 2nd hand cars as if nothing has changed at all? Come on, you can't have your cake and eat it, can you?
With that, I rest my case.
Thank you, Victor for your reply and interest in the COE issue.
ReplyDeleteI am actually not looking for support for this idea because I know that many Singaporeans are used to having the COE system or may have fully bought the official justifications for it. You have your own way of looking at it and I respect every opinion of yours. My intention is not to convince, but to inform and set people thinking about it in different ways.
It is alright to call the idea simplistic, naive or even silly. It is immaterial. I'm also fully aware of possible negative ramifications if this idea is implemented. I think I have already explained why such negative consequences are unlikely (please read beyond the first sentence of Point No. 5). In any case, if there is an irrational rush for second-hand cars or if second-hand car values were to rise, so be it. Free market forces will allow the second-hand market to find its own equilibrium point. I don't think anyone is crazy enough to buy an old second-hand car at a very high price just to scrap it in order to register a new car.
So, Victor, if we do not want to play ourselves into the hands of those who want us to continue to pay $77K for a piece of paper or for the right to continue driving a 10-year old car, we should instead help each other think of ways to get rid of the totally unnecessary COE system. I thank you in advance.
Black Swan - a lousy system is not the worse system. It could be worse!
ReplyDeleteDear Mathew,
ReplyDeleteWe all know why such a system is in place and why no fundamental changes are being planned. But, I think we should put on record what a fair person would think of it. If such a crazy, inefficient, unnecessary and inequitable system can be implemented by a modern society for 23 years, it speaks volumes about the backwardness of human societies. If even common sense is elusive, it can't get much worse than that!