Tweak COE system for better social outcomes

The coming three to five years will see an increase in vehicles reaching the end of their 10-year certificate of entitlement (COE) lifespan and, hence, a probable increase in vehicle deregistrations ("Car firms are on a hiring spree"; Thursday).

Young Singaporeans looking to purchase their first car are certainly hoping for a corresponding drop in COE prices.

It will also be an opportune moment to re-examine our vehicle ownership policies.

A pertinent question to ask would be whether the present system produces the best social outcomes.

Capping the number of vehicles on the road is the first and fundamental objective of our ownership control policies, which the COE system definitely does.

However, being based on a market-forces approach, where the highest bidders earn the rights to own vehicles, it results in a cycle whereby ownership of cars is passed from the wealthy to the even wealthier, decade after decade.

In such a small country with a highly developed public transport network, no one really needs a private vehicle to get around.

But one segment of society that would benefit most from owning a car, though, would be young families with children aged up to their early teens.

The current COE categories should be revamped towards a social rather than purely economic objective, with a category solely for families with young children up to the age of about five forming the bulk of COEs.

A strict debt service ratio rule and restrictions on the type of car should apply for families applying to own a car in this category. The smaller number of COEs available in the other categories would double or triple in price but still remain affordable for the wealthy.

These changes would encourage more Singaporeans to form families and have children, which is a solution to our demographic challenges. At the same time, revenue collected from the COEs would not be severely affected, because of the wealthy paying more for car ownership.

The COE system can be improved for a better social outcome, hence, we should not pass up this opportunity, especially when such simple tweaks can achieve so much more.

Mohamed Yazeed