Does the COE system need a radical overhaul? A look at three alternatives
Alvina Soh
AS HOUSEHOLD incomes rise in coming years, coupled with Singapore’s policy of zero growth in the car population, the long-term trajectory for Certificate of Entitlement (COE) prices is expected to trend upwards.
Premiums for passenger car COEs rose across all categories in October’s second round of bidding, with new highs set and the Open category nearing the S$160,000 mark.
These new highs have prompted renewed calls for a reform of the 33-year-old bidding system..
The COE bidding system – with its feast and famine supply cycles – has led some commentators to point out that its impact goes beyond its intention of controlling vehicle population.
Amid the ongoing debate, we summarise three suggested policy amendments from The Business Times articles:
1. Tax usage more than ownership
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What: Make drivers pay more for driving but tax them less upfront when purchasing a car
Why: Usage-based road pricing is the most direct way to continue to keep our roads relatively congestion-free. This would mean having more COEs available while making it a lot more costly to drive from the first mile.
The challenge: It is crucial to get the balance right; but if it makes drivers think twice before they turn on the car engine, a “car-lite” society can be a reality – and still leave room for the car population to grow marginally.
SEE ALSO
Read more: If we want affordable COEs, islandwide road pricing is the way to go
2. Create a separate COE category for PHVs
What: Exclude private-hire vehicles (PHV) from private car COE bidding. They should be treated the same way as taxis.
Why: The number of private-hire chauffeurs and self-drive cars on Singapore’s roads nearly quadrupled from about 19,000 vehicles in 2014 to over 77,000 in 2019. The expansion of PHV fleets has fed a perception that they are behind the significant increase in COE prices. This has led to calls that PHV operators should bid in a separate COE pool.
The challenge: Not everyone believes this is a fairer model, One industry watcher likened restricting PHVs to mitigate competition for COEs to “cutting off your nose to spite your face”.
Rather than viewing PHVs as the cause of the COE pricing problem, it may be sensible to reframe them as a potential solution: a larger proportion of cars are being shared, allowing PHVs to serve more people.
Read more: Ride-hailing, COE prices and Singapore’s car-lite goal
Stronger regulation, appropriate pricing model needed to ensure right balance of PHVs
3. Adopt a lottery mechanism
What: This system will not require the COE system to be subjected to market forces. The lottery could be a first layer of distribution, with bans on transfers and reclaims on unused allocations. These reclaimed allocations could then be subject to an auction, as they are now, if the government’s concern is revenue for its annual Budget.
Why: This would give every Singaporean, regardless of income level, a chance at vehicle ownership.
The challenge: A reduction in COE revenue for the budget. It should be noted, however, that COEs contributed just over 3 per cent of Singapore’s annual budget inflows over the past five years, and shrinking that source of income should not make too big of a dent on the coffers.
Read more: Time for a fundamental rethink of the COE
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