Debated in Parliament on 8 Feb 2013.
Ms Denise Phua Lay Peng asked the Minister for Transport if LTA will modify the current COE bidding system to allow for balloting of fixed-priced COEs by user categories while retaining the quota ceiling.
Mdm Speaker, let me first thank the Member for her suggestion, which we ourselves in the Ministry have considered before.
The big challenge in a balloting system for COEs is that even those who have no real intention to buy a car would try their luck. This is especially because the "prize" of the ballot, in this case a COE, will be much sought after and a person who wins the ballot can quite easily decide to cash out and literally "make a small fortune". It is not that we have anything against people getting lucky but such a system will, in fact, generate additional demand and reduce the chances for those who really want to buy a car. It would also lead to a black market where balloted COEs are resold to genuine car buyers at a much higher price.
This, in fact, was the experience when Beijing introduced a balloting system for cars in 2011. The Beijing municipal government released about 240,000 quotas that year, allocated through a monthly lottery system. This number is only one-third of the 750,000 cars registered in the previous year of 2010. Applications to the lottery have since increased exponentially, exceeding a million applicants for the monthly quotas of 20,000 and that number is still rising. So, every month, 20,000 quotas, but also, one million applicants every month right now. It is anybody's guess how many of those one million applicants are trying their luck for the first, second or even nth time. Furthermore, the lotteries have made under-the-table deals a very lucrative business.
Balloting also does not help us to better satisfy the demand for cars, unless we give special preference for certain user groups. This, however, has serious drawbacks, as I have explained to the House earlier this week. In addition, we would have to fix some arbitrary price for COEs given out under a balloting
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system. It has to be high enough to deter speculators and yet not too high for people who would like to own cars. The Member will agree that this is next to impossible as any price that is lower than what people are willing to pay will attract speculators.
To summarise, balloting essentially means telling genuine buyers, whether they are families or businesses, that getting a COE depends on the luck of the draw or having to resort to the black market. Neither of these is very reassuring and, clearly, not an improvement over the present system.
Mdm Speaker, I thank the Minister of State for the reply. The ever-escalating COE is a bug bear among Singaporeans, and there is also talk that potentially, the COE can go up to more than $100,000. I was just wondering if the Ministry could consider at least studying what are the models available around the world and get Singaporeans to maybe come up with our own model, and address this bug bear. We could use the Singapore Conversation series as a platform to do that. I think we need to engage Singaporeans to look into this. Let them have the information about the fact that you already have studied this model or other models, and engage them, so that we can perhaps draw some wisdom from them as well.
Mdm Speaker, I thank Ms Denise Phua for her comments. For example, we could look at how the categories are defined.
I totally agree with the Member that it is an area that we need to reach out more and share with Singaporeans why some of the options that are very well-intentioned do, however, have some serious drawbacks or difficulties in implementation. So, that is something that we are working on. And I would also agree with the Member that if there are opportunities for us to go out and explain the different options that the Ministry has considered, we would be very happy to do so. At the same time, let me reassure her that this is an area that we will try and see if there are ways to refine.
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Mdm Speaker, I thank the Minister of State for the response. As a follow-up question, and to raise the issue that I raised two days ago again, if there could be a re-consideration for those who treat the road as their livelihood. Therefore, commercial vehicles, companies, SMEs, who are requiring transport or transport of their workers and tools for their trade, and if there is a review of the COE system or a tweak of it, could priority or consideration be had to this group? I understand that there are two auction processes for the COE, but if that could be tweaked, I would be every grateful for that.
Madam, again, I thank Mr Christopher de Souza for raising this concern on behalf of especially small businss owners. I do have a lot of sympathy for this group because they do need it for their livelihood. Yes, we have made the additional registration fee as low as 5% for Category C vehicle owners, as compared to 100% of the Open Market Value for car owners. So, there is already a big price difference between what business owners will have to pay for goods vehicles and what individual owners are currently paying for the privilege of car ownership. But I take his point and it is something that we are very mindful of, and we are looking at some possibilities.
Mdm Speaker, I would like to ask the Minister of State whether the review of the COE is on the way. If it is, then when will this review be completed?
The COE system is actually quite complex, with many different dimensions. One of the key things that we are trying to do is to ensure that whatever it is that we do to the COE does not distort the market inappropriately. I understand that there is a sense of urgency. What I can say to the Member is that we are also very mindful of the urgency.
Order. End of Question Time.
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