COEs for Commercial Vehicles

The Senior Minister of State for Transport (Mrs Josephine Teo)(for the Minister for Transport): Madam, about 31,000 small delivery vans will see their Certificates of Entitlement (COEs) expire between now and 2017.

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All goods vehicles and commercial buses, whether large or small, fall within Category (Cat) C of the COE bidding system. It is not desirable to have too many categories catering to different vehicle sizes as it can lead to excessive volatility in quota numbers and prices in each category.

Objectively speaking, the COE system has served us well in controlling the overall vehicle population. Road pricing, on the other hand, helps us manage regular road congestion by influencing road usage decisions. The two systems complement each other. A satellite-based Electronic Road Pricing (ERP) system will certainly allow us to have more precise usage pricing, such as through distance-based charging on congested roads, and we will be reviewing in the next few years before ERP2 is implemented at the end of this decade, whether any of our policies could be improved. However, fundamentally, in land-scarce Singapore, controls on both vehicle ownership and usage will still be needed.

Mdm Speaker, I would like to ask two supplementary questions. COE, to a large extent, has controlled the population of cars. However, because the big trucks, big lorries and small vans are all placed under the same categories, a lot of feedback says that because of the fierce tendering system, the smaller companies, the small and medium enterprises (SMEs) which need the small vans, cannot compete with the big companies who have the capabilities and the muscle to tender for the COEs. I would like to ask: is there any other way to help the SMEs which need the vans for their businesses? Secondly, how many COEs will be available over the next three years, as the Senior Minister of State mentioned earlier that 31,000 COEs will be expiring?

Mdm Speaker, as Er Dr Lee was asking the question and expressing the concern that bigger companies were outbidding smaller companies which need smaller vehicles in Cat C, it reminded me of an argument that was made very strongly just one or two years back that if we removed taxis from Cat A, we would see a very different premium. In any case, we did remove taxi companies from bidding in Cat A, but I think the results suggest that that argument was probably unfounded.

So, to the Member's suspicion, it is not something that we can prove or disprove. But I would say, the point that the Member raised that we want to attend to is that some smaller businesses do face pressures in terms of needing a vehicle for their business. Where we have put our efforts is in trying to be helpful to businesses in general, and small businesses in particular, where they need vehicles for the smooth operation of their businesses. There are several measures to help them manage the cost of vehicles.

Firstly, for example, commercial vehicles are subject to lower vehicle taxes. And when businesses purchase a vehicle, the Additional Registration Fee for commercial vehicles is set at 5% of the vehicle's Open Market Value (OMV), compared to an effective rate of between

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100% and 180% of the OMV for cars. Commercial vehicles also enjoy lower effective road tax and are exempted from diesel fuel taxes.

Secondly, businesses are allowed repeated five-year renewals of their COE. Earlier on, I mentioned that 31,000 small delivery vans will have their COEs expiring between now and 2017. A large majority – more than 80% of them – have more than five years of statutory life remaining. They can thus choose to go for two consecutive five-year renewals, instead of renewing directly on a 10-year COE. So, that facilitates their cashflow management.

Thirdly, we introduced the early turnover scheme where businesses can transfer any unused COE life to a new vehicle and enjoy discounts if they replace their more pollutive pre-Euro and Euro-1 diesel commercial vehicles. In addition, they do not need to bid for a new Cat C COE. They only need to pay a discounted prevailing quota premium for such vehicles when they turn it over. And since the scheme was enhanced in March last year, in fact, the discount on the prevailing quota premium is, on average, $23,000, a very considerable amount. That is why we have seen a steady increase in the take-up on the early turn-over scheme.

These are some of the measures that we take to help businesses where vehicles are concerned. These measures are also complemented by other Government schemes to assist all SMEs directly with tax deductions, grants or micro loans.

As to the Member's second question on how many COEs will become available, your guess is as good as mine. It really depends on several factors. It depends on how many vehicles are deregistered and it also depends on what is the permitted vehicle growth rate, which we have already given indication of. But deregistration really depends on the vehicle owners themselves. Analysts have given their own projections and forecasts. I think it is something that we will only really know when the deregistrations take place.

I thank the Senior Minister of State for the answer. But we cannot, because of the example of the taxi COEs not achieving the effect that we would like to see, that we should not try to come up with a category for the small vans. The feedback is that many of them, they have already renewed the COEs, but how many times can they keep on extending it? They need the vans for their business. So, I would like to ask whether there is any difficulty in allocating a certain number of COEs for the small vans.

Madam, as I have explained earlier in my reply, it is something that we have to be quite careful in thinking through. The more categories we split them into, it means that, within each category, the numbers that can be made available for bidding each cycle would likely be much more volatile. And we have to ask ourselves whether that is, in

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fact, helpful to small businesses.

So, we understand completely where Er Dr Lee Bee Wah is coming from. But we also have to ask whether the alternative that the Member has suggested is, in fact, going to be helpful to SMEs.

And, please, let me assure Members that if it is something that is, indeed, likely to be beneficial, there is no reason why we cannot consider it.