No immediate plans to hold back COEs

Singapore

THERE have been calls to smoothen out the future supply of Certificates of Entitlement (COE) by holding back COEs, but this is not a straightforward exercise and the government has no immediate plans to implement it.

Senior Minister of State for Transport Josephine Teo, responding to the possibility of "reserving some COEs today for release in the future in order to make the COE supply less variable", said during the Committee of Supply Debate on Wednesday that the idea had been studied over the past year, but that its implementation would not be straightforward, given that the overall vehicle population growth was constrained.

"A surge in COE supply comes mainly from increased deregistrations. But this will be accompanied by a corresponding increase in the number of car-owners looking to replace their cars."

She said the big unknown in this was how many car-owners would do so, and how long they would wait.

"If we reserve too few COEs, there will be no meaningful impact on supply smoothening; too many and we risk having a shortfall of COEs to meet replacement demand and may inadvertently introduce even more volatility into premiums."

As for the suggestion to categorise COEs according to carbon emissions, Mrs Teo said the level of emissions was not a good proxy for the value of a car, and that categorising them in this way could disadvantage mass-market models.

"We therefore prefer to promote green private transport through the CEVS," she said, referring to the Carbon Emission-based Vehicle Scheme.

Regarding the imbalance in the use of Category E, the open category, and whether it should be removed, she said the purpose of Cat E was to provide a degree of responsiveness to changes in buyers' preferences, "without which the COE system could face another problem of being overly rigid".

To address the imbalance, the Cat E contribution rate was cut from 25 per cent to 15 per cent in February 2013, and to 10 per cent in February 2015.

"We will continue to review this from time to time."

Turning to taxis and whether the 2 per cent growth cap on taxi companies will be reviewed, she recounted that taxis were removed from the COE bidding process from August 2012 on the back of strong suspicions that taxi companies were pushing up COE prices.

"Our sense is that the suspicion has largely proven to be unfounded. But rather than re-introduce taxis into COE bidding, we'll continue to allow taxi companies to pay the prevailing quota premium or PQP of Cat A when they renew or procure new COEs; this is a concession to the role of taxis in public transport, as many taxis would otherwise require Cat B or E COEs. Taxi companies can therefore expand their fleet up to the growth cap, provided they meet the taxi availability standards."

Mrs Teo disclosed that a basic regulatory framework to safeguard commuters' interest will soon be proposed for third-party taxi-booking applications: "This will include how third-party services should clearly differentiate between taxi-booking services and chauffeured services so commuters can make informed choices."

She announced this when mentioning that the average income of taxi drivers rose 6 per cent last year from a year ago with the growth of third-party apps.

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