Meeting the Transport Needs of Singaporeans

Thank you, Sir. I would like to thank the Minister for his Statement. I would like to make two suggestions in terms of the current COE system – and these are not new. These were suggested previously.

First, would MOT consider a pay-as-you-bid system instead of people bidding higher and then paying for the lowest rate? Second, can we disallow financing of COE, which means that when you take a loan, it has to be only the car loan and not the COE? The COE has to be paid in cash.

Mr Deputy Speaker, if there is one thing I have learnt in my short time in MOT, there is no shortage of creativity in the suggestions made to improve the COE system. I thank the Member for his suggestions.

But if I may, say, first, a pay-as-you-bid system, I understand the motivation behind it. But if I may offer Members the counterpoint – the problem then is you create a great deal of variation in the market. For the same car bought in the same exercise, the value may be quite different because one bids higher and one bids lower.

I do not want to get into a long discussion on this, but from an auction theory perspective and so on, actually the method we use is probably the most efficient. So, I would say that that is not the source of the problem. Let us diagnose this correctly. The issue is not the system or how it is being administered per se. The issue is really around supply and some level of volatility that we are trying to mitigate, as well as where we can or where we discern some need to intervene because of either speculation or some inefficiencies in the market. And that is what we have sought to do.

The second point on financing, I would say I think it is a question that should be put to the Monetary Authority of Singapore (MAS), frankly, or the authorities. But if I may just offer Members this perspective. A COE and the car are indivisible, really. A standalone COE is of little value until it is applied to register a car. So, one needs to look at it in totality first.

Second, if you look at it from the point of view of the cost of buying a car, which then you are seeking to finance, I think most financial institutions will look at it as a whole – the value of the car, the market price, including the COE price. So, that is why the system runs as it is. Again, I want to go back to the point that I am not sure that decoupling the financing is going to be the solution to the current set of concerns that Members have.

My first question to the Minister is, I think he mentioned that the reason why COE prices are higher is because of high demand and limited supply. But I would like to ask the Minister whether another reason why COE prices may be at this level, this recent wave, is because of the disparity in the purchasing power among the bidders. In other words, there are, in each batch of the COE bidding, more bidders that have higher purchasing power and, therefore, the ability to pay up; and that is where the COE prices are. So, I would like to ask whether that is desirable.

The second question is whether some amount of allocation by balloting, like how we do for housing, can be part of the solution as well.

I thank Mr Liang for his questions. I am not sure what the Member means by disparity in purchasing power. Because, as I explained earlier, overall, if you look at it over a 10-year cycle, peak to peak, our incomes have risen. And to the extent that cars remain an aspirational product or a necessity, then you must expect that there will be a propensity to want to allocate the budget to buy that and the prices will reflect, to some extent, the trends in incomes as well. That is why I gave the numbers that I did. That is not to say that that is the only factor but, generally, if you compare it to incomes rising and so on, I think that does tell us an important story.

Secondly, I would say that in terms of ownership – I stressed this point and I would like to make it again – we have 470,000 households in Singapore that own cars. That is about 36% to 37% – so, it is a very sizeable proportion of our population base. So, what we have been trying to do is, through a combination of ownership and usage measures, make cars available as widely as possible, but within our zero-growth constraint, which we have imposed for good reasons. And that will continue to be the basis.

The Member's second point was on balloting some amount. I am very sure all the Members here will be able to offer perspectives on it, but let me just deal with this. If we say a proportion of COEs are balloted and the rest are not, then the question is: so, we have a market where you bid and you secure; and then, there is another segment which is by luck of the draw, literally. How do we price that? Do you price it at the same price as the COE in that period? Or do you say no, it is a discounted price. If it is a discounted price, then it is a windfall for the party that gets this, because they will then be able to resell the car with the COE at a higher price because the market clearing price is higher. Then, the question is: what justifies such a ballot, who qualifies and how do we do it?

I am just sharing this with Members because I appreciate the intent behind the suggestion, but I am trying to point out that there are several, quite intractable, second- and third-order issues we will have to deal with. And we will very quickly move from discussing COE prices to wondering why the balloting system is not working. And, indeed, we do have discussions like that in this House as well. So, a balloting system is not a panacea. In fact, it may aggravate the problems, if the concern is around price and unevenness in the market.

Thank you, Mr Deputy Speaker. I have two clarifications. One is in relation to the COE, whether the Ministry has conducted any public surveys to better understand and discover what are the factors that would persuade more private vehicle owners to switch to public transport.

Another one is in an effort to reduce carbon footprint, what is the ratio of the single- to double-decker buses currently in service and whether LTA has plans to move towards 100% double-decker buses to maximise ridership capacity and, thereby, an effort to reduce the carbon footprint?

Mr Deputy Speaker, I thank the Member for her questions or clarifications. Factors that will persuade the car owners to switch – there are several and I have talked about some of them. The most important thing that we need to do is to populate the spectrum of commuting choices available to Singaporeans. The more we are able to offer a high-quality public transport system and near-car kind of services, whether it is car sharing, your P2Ps and so on, and if we can also make the first-mile last-mile part of the commute a better one, then I think people who choose to pay the sum that they pay, or the sums that they pay to buy a car, will have reason to take a pause and re-evaluate the choices that they make.

But in the end, every individual is entitled to make their allocative decisions. What we are really trying to do is to make the alternatives as compelling as possible. In fact, you hear this more from people who have lived overseas and come here. I was recently at an American Chamber of Commerce dialogue. And one of the ladies said she came from the US where she was wholly reliant on her car. She was waxing lyrical about our public transport system. Her teenage daughter who studied here, used our public transport system, has since gone to the US for her further studies in Houston. According to her, the daughter laments that the public transport system in the US is not of the same quality and accessibility as here.

So, we do have advocates and I am very keen to get more of such advocates, especially Singaporeans. And we do have. Many Singaporeans have told us that they really like the fact that we have a good public transport system. Of course, there are always areas we can improve.

That is also why I cited the survey – there is a perceptible shift in the preferences of the younger generation of Singaporeans. They are more adept at using technology and some of the solutions already available. As a result, they are less seized with the need to buy a car. In fact, they think there are other ways of using their money. And I say, good for them, in that regard.

Single- to double-decker buses, I do not have the exact numbers. But I will put it this way – the move for sustainability is the thrust of the Member's question. The main way we are seeking to ensure sustainability is through electrification. We have about 6,000 buses in the public bus fleet. And about half of these will be electric by 2030; the other half will be a hybrid solution. So, that is how we are moving.

In terms of single- and double-decker buses, a lot of that is actually a function of capacity planning, based on the routes and the kind of demand. This can vary, depending on how commuter behaviour changes over time.

Thank you, Deputy Speaker. Would the Minister consider alternative ways of allocating the vehicle quota based on other factors, instead of just price alone? For example, maybe a point-based system, where apart from the bidding price, we also consider other factors like nationality, and needs-based factors, like families with young children or persons with disability.

Secondly, would the Minister consider, in the same way as we have the Additional Buyers' Stamp Duty (ABSD) for the purchase of second or more residential properties, would the Minister consider an additional levy on additional vehicle purchase?

The Member has raised a few questions. Let me try and deal with them.

A point-based system – it is really a variation of the idea that Mr Liang Eng Hwa talked about, a ballot. Because in the end, you have got to decide how you would allocate the points, on what basis? And how will that then factor into the final COE allocation? Does that mean that if someone has got more points, then they are entitled to a different price when it comes to the COE? Or does it mean that they go into a different pool? And if they go into a different pool, how do we segment the pools?

So, I think a point-based system has, in a sense, the kind of arbitrariness that we are trying to avoid. We are trying to let the market work itself through. We do have schemes where we help people – for example, those who have special needs or persons with disability who need vehicles for, say, work and so on, we do have schemes to help them with that, including with the COEs and so on.

Those are very targeted measures that we can do, but that is best achieved not by tinkering with the COE allocation system, but by, instead, trying to defray some, if not all, of the cost impact on certain groups.

It is not unlike what we do, for example, for electricity in Singapore. We price electricity fully. We do not subsidise it. We do not say "first hundred units X, next hundred units Y". We price it all the same, because every one, from the beginning, is a unit of electricity. But then what we do is that we provide U-Save rebates and so on. So, if we want to help certain categories of people, it is best to do it that way.

Then, the Member makes a point about needs-based. And I am quite sympathetic to her point, because many families say to me: "Look, I have got children and I need to take them around to enrichment classes on the weekends and so on, and public transport does not quite work for me". And then, we have others who say: "Look, I have got elderly parents whom I need to take to hospital or for medical appointments" and so on. I think if you look at households in Singapore, they will either have children or elderly parents they have to look after and that will probably cover most households in Singapore.

So, everyone has a need that I think we can understand. The real question for us is: do we have the resources and the capacity to meet that need effectively? That is where the challenge lies. I mean, I would be very happy if we had a cornucopia of COEs that we can just dispense at will. But we do not, because of the constraints I have highlighted. And that is why we have to make some tough choices in the allocative sense.

Having said that, we are working on and, in fact, we do have some alternatives, as I have said, for persons with disability and so on, we have got certain targeted measures. Also, car-sharing services, because these allow households to have a car for a few hours to do what they need to do and then come back and leave the car for somebody else to use. So, that actually is a more efficient outcome and, in fact, it would save households a lot more money than buying a car and incurring the depreciation. That is one of the things we are doing and we will do more.

Also, some of the P2P operators, like Grab and so on, they offer chauffeured services where you can do block booking by time. For example, if you want to take your parents to hospital you think it will take you four hours or whatever, you can make those sorts of bookings as well.

So, there are other solutions in place and I would say that that is something we should keep in mind.

As far as the idea of ABSD is concerned, I have already pointed out clearly that the COE price that we see today is not explained by multiple car-owning households. They have actually been quite constant throughout. The question is: what is the problem we are trying to fix here? Because you may come up with the tool, it may be a very popular move, but does it really address the problem at its root?

Thank you, Mr Deputy Speaker. I would like to thank the Minister for sharing the Statement earlier, especially about the release of the five-year COE supply and also the measures taken by LTA over the past few months about the deposits and all that. It has actually helped, in terms of price recovery and microstructure.

I got two clarifications, Deputy Speaker.

First, in relation to our transition to move away from and finding alternatives to private car ownership, the Minister mentioned just now about enhancing the alternatives of P2Ps, PHCs and taxis going forward. My question is that as we still have Singaporeans aspiring to own cars and we are trying to go car-lite, I think these are the sorts of issues that I am hearing from the Minister's Statement, we are not moving away from them anytime soon – car-lite, zero-growth, we are a very small country and the push is towards public transport. That is clear, Minister.

So, the question is the transition. There is going to be a time transition for people to move away from their aspirations. My question is: if you go towards the holistic approach or to the car-lite strategy and zero-growth, how can we improve our P2P, PHC and taxi services? Because the exasperation of Singaporeans on the ground, if they want to move away from a private car, but they have to wait for taxis and PHCs and these are not there, every single minute when they want to have access to it, 24 hours of the day and at any time, is something that will need to be addressed. That is my first question, Minister.

Second, I would like to get some clarification with regard to the five-year COE supply in terms of the numbers and what is the direction or thought trends going forward beyond the existing three to six months this year and probably into the many years ahead.

I thank the Member for his questions.

Mr Deputy Speaker, with your permission, just to address one other point about ABSD that was raised. If the Member's intent is that we should have progressivity in the COE system, actually, we already have significant progressivity through the tax system, the ARF system that we have today, in terms of cars. In fact, the Finance Minister announced a whole set of moves to further increase the gradient and the progressivity.

So, I think those who are buying cars are actually going to be paying more and, especially if they are buying higher value cars or more expensive cars, they end up paying a higher amount in taxes as well.

On Mr Saktiandi's points, first, whether we can do more to increase the supply of the P2P, the private hire cars – and we use all these terms interchangeably – and taxis and so on. The bottom line is that we need to try all measures to enhance the availability of car-like – not car-lite – but car-like services. Because what people really value is the flexibility to be able to hop into a car and go to multiple locations in a certain period of time and come back. But it is a waste to have the car sitting in the carpark when you are not using it for hours, when you only need it maybe a few hours in a week. That is the crux of it.

So, we need to find more alternatives and that is what LTA and MOT are working on what we can do in terms of more in the P2P sector and the PHCs. I have a smile on my face because the Member is asking for whether we can do more and have more PHCs. I think I have just heard from others advocating quite the opposite. So, you understand the conundrum, I think.

But the bottom line is, car for car – if I take a car away from private ownership and we put it in the P2P sector – it will benefit more people, at least, as a first principle. Then, there are all the issues we need to deal with in terms of policy.

So, we are working on a whole range of ideas on this, how we can do more. And I accept the Member's point that there is a transition. The transition is not just in terms of going to car-lite, but also because it would take us at least about 10 years more before our MRT system comes to that level where we really have good connectivity in many parts. We already have pretty good connectivity, by the way; but this will take it at least a notch higher and we will be comparable to the best cities in the world.

So, the key thing is to manage the transition. And as I said, it is about populating the choice spectrum, giving people a whole range of options from public transport at one end to private car ownership on the other, and everything in between. I think the more we can populate that choice spectrum and give people the information and the convenience to exercise that choice, then we are on the right path.

On the five-year COE supply, I think the Member's question is how it will be redistributed. And it is not just for one or two quarters because LTA will be releasing more information. Essentially, we have got five-year COEs that will expire probably in about three- or four-years' time and that is when you are really going to know, if you look at the historical cycles, there is going to be a sort of peak-ish. If you go on the basis that everybody who is reaching their 10-year mark is going to de-register, then you are going to be at a peak.

So, that is where LTA is basically extracting the five-year COEs from. And these will be redeployed – in not just this quarter, the next quarter but in the next few quarters at least, leading up to this. Because, essentially, it is, as one of my colleagues put it, a cut-and-fill exercise. You are really trying to smoothen the curve, try and avoid too sharp a gradient and, worse, the volatility, the ups and downs. That is what we are trying to do.

But I want to emphasise again: this is not about therefore expecting prices to ease and that is the measure of success. The objective here is to smoothen the supply, reduce the volatility so that people can then make their choices. I have put out the information and I think car buyers as well as car dealers, based on that, I am sure their behaviour and the next and subsequent bidding rounds will be informed by this data.

I thank the Minister. I have two clarifications. One is on motorcycle COEs. I think the Minister will know I have spoken on this a number of times, including on 1 March where I asked for more measures to deter speculative bidding. And I think what the Minister mentioned about the main measures suggests that he now recognises that, beyond supply and demand, speculative behaviour by dealers who have the incentives to bid up prices actually is a factor, and especially so, it is amplified in a market where we are talking about a few hundred COEs every month.

And I think what sits with us is that we all feel that it is particularly egregious when the people who bear the brunt of these actions by dealers, are people who are the lowest income workers, students who are holding part-time jobs because they need to earn.

I guess my clarification is, can we do more to close down these loopholes a bit faster? How can we be more responsive? One suggestion could be – I mean $200, $800, $1,500, it is a bit arbitrary. Could we tie the dealer deposits to the size of their bids, to be a bit quicker to rein in speculative bidding? Two, could we allow for individuals to bid, like we have for cars, for motorcycles also? And three, is there a way to provide more transparency on individual dealer bidding practices?

My second clarification is on car COEs this time. The Minister mentioned that they are currently still studying the impact of PHCs on COE prices. So, I want to just clarify, is there no evidence? Does the Minister feel that there is no evidence today that the PHCs are driving up COE prices? I mean the market works, but it is also not a level playing field as we know. They have ways to pass on higher prices and also the ability to convert some of these PHCs into private cars, although, of course, there is a market for that.

So, how can we close down some of these loopholes? Do they actually exist today? How many cars are converted from PHCs to private cars by these platform companies as an option? And can that be closed down as a low-hanging fruit?

I thank the Member for her questions. First, I want to just be very clear. The Member suggested that the moves we make affirm or confirm that there has been speculative behaviour and that that is what is causing the prices to go up. That is not quite what I said. So, let me just repeat that clearly.

The fact is the market has already been functioning and the way we know that is when the price goes up, as it did in some of the earlier cycles when the COE price for motorcycles went up to $13,000; and subsequently it came down, the market corrected. And how did it correct? Well, those who were left with very expensive COEs realised that they cannot sell the motorcycles with those COEs and they then had to give up the COEs or they forfeited them. And we then have to recycle that into the market.

What happens then is, just to be very clear, before we made the latest move, such as the reduction of the validity period, was that the supply that is forfeited cannot be returned to the market until the next quarter. So, there is a lag of at least 10 to 12 weeks before it goes back. And what we wanted to do was to re-channel quicker. So, we shortened the validity period and then the motorcycle dealers can decide what they want.

Similarly, I do not think – whether it is $800 or $1,500, they are not arbitrary. I beg to differ with the Member.

If you take $1,500, for example, it is something like – well, at least before this recent correction which may or may not be sustained – but it is about 10% or so and it is of a similar order of magnitude to what we have for COEs for cars. So, there is a certain method in it. Why do we exercise restraint and caution in raising the bid deposit? Simply because, precisely what the Member says. If we inadvertently, through our policy moves, because deposits are very high, cause motorcycle prices to rise even further, then it will harm precisely the group that the Member wants to help.

And that is why we have been cautious about the way we have done this. We may not be as fast as some would have liked but I think the yoke of being in Government and in LTA and MOT is that you have to exercise judgement and decide not just what to do but also how much and when. And this is what has eventuated in what we are doing now.

Can there be individual bids? The answer is yes, there can be. But the market practice, in general, is that motorcycle buyers have a preference to just be able to go in and buy in the shops. This is why we have had this arrangement for motorcycle dealers. But there is nothing really that stops us from accommodating this and, in fact, we do already.

On PHCs, is there no evidence of PHCs driving up prices? Well, I would like to draw the Member's attention to what I said in my Ministerial Statement. Basically, in the period, for example, 2015 to 2017, when the PHC population grew from 30,000 to 70,000 or nearly 70,000, so doubling, the impact on COE prices was not particularly discernible. At least I do not recall it. I was not in MOT then, but there were not a lot of questions about it.

By the same token, and conversely, over the last several quarters and years, COE prices have been rising but, actually, PHC demand or the number of COEs PHCs have secured has actually been moderating. So, I do not think you can make an argument ex ante that there is a causality.

So, I understand that we are unhappy when prices go up. But let us not be too quick to conclude what the causes are and, therefore, start fixing problems that may not really be at the root of the issue.

But having said that, I concede the point to the Member that the fact is, it is new and that is why I said what I said in my Statement. PHCs are a relatively new phenomenon and it is a very variegated terrain. It is not just your Grabs; you have got your car-sharing guys, you have got the rental guys who then lease to the drivers and so on. So, there is a whole variety. So, it is important that we understand this correctly before we decide whether there is a need to act because they have an impact that perhaps distorts a market and then, if so, then what are those targeted measures. And that is what MOT and LTA are studying.

Thank you, Mr Deputy Speaker. I have some quick clarifications pertaining to public transport. In the new fare adjustment formula, how is the productivity contribution quantum of 0.1% derived? Are these all the productivity gains that MOT is expecting the PTOs to achieve and could that be too low an expectation?

Secondly, related to that, how closely does LTA work with the PTO to conceive and implement productivity enhancing measures and how can LTA be sure that the PTOs do not treat the 0.1% productivity contribution as a cost of doing business without significant productivity gains that will reduce costs over the long term and help to stave off future fare hikes?

And lastly, when PTOs rationalise bus services – for example, the removal of bus services 22, 66 and 506 for my residents in Bedok Reservoir in 2022 and 2021, sorry I am not letting go of this – which saves the Government $9.5 million a year in subsidies, how are these cost savings passed to commuters?

Mr Deputy Speaker, I thank the Member for his persistence and perseverance. Let me try and deal with the issues in turn.

First, the formula – I think it is important to understand that 0.1% is a productivity contribution, but it is a deduction from the fare increase. So, leaving aside, for example, the recent periods when it is 12% or 13% and so on, if you look at in general, let us say you have a year when the fare increases 2%. When I extract 0.1% from you, if the fare increase is 1%, I am extracting 10% from you; 2% is 5%. If it is a 3% increase, then 3.3% and so on. So, it is actually quite a sizeable imposition on the PTOs. It is not a free pass by any means.

The Member's point about whether we are doing more to work with them on productivity and other areas, absolutely. I think this is an important thing. It is a win-win. It is not something where we want LTA to just dictate and be left with it. We see this as a joint endeavour and that is why many of the moves that are being made, in terms of technology, fuel efficiencies and so on, these are all areas that we are working together with the PTOs on.

On the Member's point on rationalising bus services and, when there are savings, how does it get passed through to commuters? So, if I may, like the Member, persevere and persist with my counterpoints, the fact is that we are subsidising bus services a billion dollars a year. We are not recovering costs by any stretch. So, any savings are ploughed back into the system and it just gets distributed at large. But the bottom line is that we are subsidising public transport significantly. A billion dollars for bus, a billion dollars for train, or, if you want to think about it in another way, every journey gets a $1 subsidy. That is not counting those who are on concession passes and those who are buying the concession fares; those who get concession fares and also the concession passes.

So, by all accounts – and I think being very objective – we are making a strong effort to ensure that our public transport system remains affordable. If you look at international comparisons, the answer is we are. And if you look at our own pattern over time, expenditure on public transport, as a percentage of household expenses, actually, over the last 10 years, it has been declining for the quintile, decile, almost all the key metrics that we look at.

So, my point is, we will continue to do our best to keep public transport affordable. There is a significant amount of subsidy. When we get savings, it is basically ploughed back into the system. We cannot do it at the particular service level; it has to be at the aggregated level. But in the end, what really has an impact on the final expenditure incurred by the commuter is the subsidy that the Government gives, and that is not insubstantial.

I thank the Minister for a very clear explanation on a difficult and emotive topic. I have a few clarifications on this five-year COE being brought forward. The first is: is this just one-off to deal with the current trough or is this going to be a change in approach to how the five-year COEs are dealt with?

The second clarification is that I believe the Minister said they would be re-allocated to Cat A. I just want to clarify, would they be re-allocated according to the expiring category or would they all be re-allocated only to Cat A?

The third clarification is I just wish to make the point that I think it is sensible to smoothen out the supply over the long term. Any measures to help do that would be fair.

I thank the Member for agreeing with us that this effort to smoothen supply is something that is appropriate. It is a one-off exercise and, specifically, because it is a five-year COE, the time horizon is five years. LTA would not know how many five-year COEs will be expiring more than five years from now. So, what we know is the projection from now to five years from now and the latter part of that period coincides with the peak in the 10-year cycle. It is a very well-defined quantum because we have to bear in mind that the rest of the supply, which is dependent on deregistration, is really variable because it depends on whether people choose to deregister and, therefore, contribute back into the supply, or they may decide they want to renew their COEs. We do not know what will happen and that will then depress.

So, the only component that we can deal with, with certainty, is the five-year COE and that certainty is only available on a five-year outlook basis, and that is why we are doing this as a one-off, because it also serves a very important purpose of smoothening the supply from now, especially because now we are more or less in the trough of the 10-year cycle. So, it is a good time to look at how we can do some smoothening and this is the reason we are adopting this. And, yes, the supply will go back to the relevant category.

Thank you, Mr Deputy Speaker. Just two questions for the Minister for Transport and they are quite narrow, relating to the volatility or trying to manage the volatility in COE prices. So, the first question is: with regard to car loan restrictions, which are now at seven years and at 70% of the selling price, is the Ministry intending to look at the loopholes vis-a-vis these car loan curbs, because it is not uncommon to hear of dealerships offering 100% loans and things of that nature. That is the first question.

The second question pertains to the continuing relevance of the Cat E COE, the open category. Unlike Cat A and Cat B, which we know are tied to car registration numbers, the Cat E COE can be traded for up to three months, if I recall correctly. So, there is a potential speculative vector in Cat E COEs. I would like to know what is MOT's view on the continued relevance of Cat E COEs and whether removing that category altogether can help towards a smoother COE system.

Thank you, Mr Deputy Speaker, and to the Leader of the Opposition. Just to be very clear, we are not talking about volatility in prices. That is not the objective of the exercise. It is volatility in supply. How prices eventuate in the market – as I have discussed and all of us know – is a function of various factors that are taking place. Today, the prices may go down, tomorrow they may go up. We think that the long-term trajectory is upwards for the reasons I have mentioned. Our supply is basically zero growth. So, it is capped. And the demand is a function, among other things, of incomes, and incomes are rising. So, we must be prepared for this.

So, if every time COE prices go up, we approach it as some kind of a new phenomenon, I think we should take pause and understand that these are the fundamentals that we are dealing with. It is a hard choice we have to make. And the decision to have a zero vehicle growth rate is a very hard choice.

But what is the alternative? So, I just want to be very clear. It is not about price volatility, although that, I know, is a political concern. It is about supply volatility and how much we can smoothen that so that the market can function. That is the key thing.

On the point on curbs on car loans, this should be a question answered by MAS. Was there a PQ on this already? Today or? Maybe I will allow my colleague, Alvin Tan, to reply. But let me just say this. Loans are under the purview of MAS and, if it is hire purchase, then I think it is under the Ministry of Trade and Industry (MTI). But the key point I want to make is that the moves we are making from the MOT and LTA perspectives are really in order to ensure the market functions as we intended and to smoothen the supply and that is why we are going for this.

On the Member's second question on the relevance of Cat E, first, we need to size the thing correctly. Cat E has 10% only. Of Cat A and Cat B, 10% goes into Cat E, alright? So, why do we do that?

Essentially, we have had basically a Cat E component from the very beginning, and why is that important? When you have got these very fixed categories, you need a mechanism, a valve, if you will, that can help redistribute some because preferences may change over time. There may be a greater shift towards Cat A, there may be a greater shift to bigger cars, there may be other kinds of movements. We do not know. So, this really creates a valve in the system. It is a valve that we have actually been progressively throttling down. In fact, in the early days, it was much more – the contribution from the different categories – and today it is 10%. So, it is at a level we, of course, as I have said, with COEs and the system, the Government has always been reviewing and constantly evaluating the relevance of measures. But I am just trying to give the context for the Leader of the Opposition's benefit.

So, it serves an important purpose. I do not think it is a purpose that is irrelevant in today's context by any means and for the foreseeable future. But if there are some other efforts to think about the design of the system, then, at that point, maybe this can be revisited. So, the reason why you cannot say I create a valve but then I restrict its usage. That is why you need the flexibility. If you cannot trade it and apply it to different categories and give them enough time to do that, then you may as well not have the category. So, the design and the features are tied specifically to the intent behind having the category. Alvin, would you like to say something?

Sir, just to build on the Minister's point. There is a PQ by Ms Mariam Jafaar at No 64 on today's Order Paper. So, I will respond for MAS using that PQ. But, primarily, MAS' restrictions on loans that are granted by financial institutions are to encourage borrowers to spend or to borrow prudently.

Thank you, Deputy Speaker, Sir. I thank the Minister for the very comprehensive reply. I have two supplementary questions on the Cat E COE. As what the Minister has said, the contribution of Cat E COE is from 10% of deregistered Cats A, B and C. I want to ask the Minister why do we want to contribute from Cat C where it is mainly used for commercial vehicles and all the Cat E COEs are mainly to register Cat B COE, which means that you are shrinking the Cat C COEs meant for commercial vehicles.

For the second supplementary question, I am very thankful that the Minister is using the COEs expiring in the next five years to reach earlier in the next few quarters. The Minister has said that they will go back to the respective categories. So, I would like to urge the Minister to really distribute more to Cat A COEs because it is a mass market COE, whereas the Cat E COEs always mirror and always register for Cat B COEs.

I thank the Member for his suggestions.

First, why does Cat C also contribute to Cat E? Because Cat E can also be used for Cat C. That it is not the case today does not mean that it would not be the case tomorrow. That is why I am saying that what we have to bear in mind is that the market has its own dynamic. We do not know how things will go. People may decide that they do not like cars, they do not want cars and there may be a need more for commercial vehicles in which your Cat E will end up being used for Cat C.

Or people may shift their preferences to smaller cars because they want to be more environmentally conscious or spend less and so on. And then, your Cat E could potentially go in there.

And, in fact, we do see some of those sorts of behaviours. The point is, you must take from the categories to which the Cat E can apply and that is why we do this.

For motorcycles, for example, we do not do that. This was some years back and the reason is because you do not allow Cat E to be used for motorcycles. So, that sort of takes the motorcycles out of it. But for all the other vehicles, they are in the same class and we put them in that contribution group.

Can we do more? This is already a big move – taking five-year COEs that are expiring in the future and bringing them to the present. That is a one big move. It is a necessary move and we think it will have a salutary impact overall on the system. So, that is why we are doing it.

But we just want to have a situation where we do not make too many arbitrary kind of decisions. So, in response to Mr Vikram Nair's question earlier, I said we will re-allocate on this basis, that Cat A will come back to Cat A, Cat B to Cat B. And based on the numbers and what we can see, it should meet the objective of smoothening supply. There is no need for cross-deployment.

As I said earlier in my Ministerial Statement, for the bidding quarter we are having now, it will increase supply by 24%. I think that is quite substantial. In fact, the five-year COEs that are available for Cat B, we are a lot less and that is why also, consequently, you see a much lower percentage increase of about 15%.

Thank you, Deputy Speaker. I have two questions for the Minister.

One is the whole discussion here actually is about prices going up too fast, too high and also about equity. When prices go up high, many Singaporeans will not be able to afford. So, one of the grievances that I have also heard from some residents is that the Cat A and Cat B, a lot of the expensive cars are now going down to Cat A. So, as a result, in order to ensure more equity amongst Singaporeans – the lower-income can still buy cars, the cheaper cars – will the Minister consider putting OMV as an additional criterion for classifying Cat A? That is one question.

The second question is that, for the recent phenomenon we have seen in the motorcycle market, it has indicated that the Government does have some leverage on controlling the prices in the motorcycle COE market. With the recent collapse, I think it is a reflection that not enough has been done in the past. Going forward, will the Minister say that the Government will be more careful because the price of a motorcycle is very important for many of our working Singaporeans; so, to be more careful in maybe controlling the prices of the motorcycle COE?

We all prefer lower prices, Mr Leong. Let us be very clear about that. We all want to help the people who buy cars and motorbikes. I do not think you have a monopoly of virtue in that regard. The real question here is, and if I hear you correctly, you accept that the long-term trend in prices must be up. So, now, your point is more about the rate of change and whether that can be something that can be done.

If I can take the Member's second question first. We do not control prices. I want to put that categorically on the table because we are not stipulating the price or even a range. The only thing that the Government is able to do is settle on the supply and if there are any mechanics in the system, whether there are reasons to adjust them. That is what we have been doing. How that flows into the market or works through the market is also dependent on demand, as the Member would know and, finally, the price outcome is how the market settles it.

We know that the Cat D price has come down. But does this mean that this is the new level? I think even if you listen to the industry players, they would advocate that we watch this for a while because whether it is buyers or dealers, they all have to sort of assess the situation and the market will have to find a new equilibrium. Where that is, I cannot say. But what I can say with certainty is that, in the long term, we will see upward price pressure for the fundamental realities we have discussed. So, we do not control prices. Please do not advocate that.

Secondly, Mr Leong makes this political point about higher COE prices mean many Singaporeans cannot afford. So, the sub-text here is that somehow it is foreigners who are buying it – because if Singaporeans cannot afford it, who is buying it? So, that is the Member's implication. I want the Member to be upfront about it because I have taken pains to point out again that the proportion of foreigners buying cars has remained low and stable.

So, yes, what is happening is actually and the correct characterisation may well be that when the COE price goes up, some people will find it more difficult to afford; other people may find it easier to afford. So, there is a re-allocation and distribution going on within our society. And that is one of the things. It is a politically uncomfortable thing but it is a reality. And I would urge the Member to be careful in the way he makes this point; otherwise, we give wrong conclusions and we end up distorting the discussion.

But having said that, if the Member wants to respond to this specifically, please do so.

Thank you. The other point that the Member makes is on OMV and whether OMV should be used as a basis for categories.

I had addressed the Member's point in my Ministerial Statement. The median OMV for Cat B is about 70%, 75% more than the median OMV for Cat A. That means actually the market is already quite separated; I mean, you have the separation in terms of value. The next thing is we have achieved this or this is the outcome but the criteria, we are using our objective criteria – engine capacity, power output, what I have described earlier. And our objective has always been to make sure that these criteria are able to accommodate the mass market models in the Cat A, as far as possible. That was one of the reasons for the recent adjustment so that the mass market electric vehicle models could also be captured.

But is there going to be some movement on the margin? Yes. So, you will see, as the Member has put it, some of the more expensive type cars migrating to the Cat A. But by the same token, we also have what are considered generally as mass market cars that are actually in Cat B. Examples will be some of the SUVs like Subaru Impreza and Mitsubishi something or other. Because of their engine capacity, two litres, they are in Cat B.

What I am trying to say is that it is not a clean cut. And the problem with using an OMV, amongst other things, is that the OMV is not something that is objective criteria because there are a lot of other variables. For example, if exchange rates move, the OMV of the car changes. So, how would you account for that?

When we are making these recommendations, let us keep this in mind that there are many moving parts. But the fundamental objective, which is the point that the Member is also driving at, we want to ensure that there is an element of progressivity in our COE system. And that is why we have two categories. And, as I said in my Ministerial Statement, we will continue to look at this and if there is a need to adjust the criteria that divide the two categories, we will look at it. But as of now, there is no compelling reason and, certainly, not to use the OMV.

Thank you, Mr Deputy Speaker. Just a quick point in response to the remark made by Minister of State Mr Alvin Tan vis-a-vis Mariam Jaafar's question for today's Order Paper. It is directed at the Prime Minister and specifically to MAS on curbs on car loans. As we know and as the Minister has alluded to, we also have car loans which take the form of almost like money lending or quasi-money lending arrangements. You have hire purchase, which comes under MTI.

So, just to confirm whether this would be a whole-of-Government exercise to look at car loans or vehicle loans, including even motorcycle loans, and whether there is any prospect of a review to ensure that the loopholes, with regard to the financing of vehicles, can be further looked at and even tightened, if need be.

Mr Deputy Speaker, the short answer is MAS will work with MOT to monitor the situation in the COE market.