Forum: More predictable vehicle quota system will lead to more stable COE market

Straits Times senior transport correspondent Christopher Tan's call last Saturday to take a big, bold step to smooth out the peaks and troughs of the vehicle quota system is long overdue (Flattening of COE supply curve can be taken one step further, July 23).

In theory, the vehicle quota system is a model for democracy in decision-making on taxation. Economists and city planners should determine how many vehicles of various types are required to serve the commercial and social needs of Singapore. Business owners and private citizens should then be allowed to decide how much they want to pay to use these vehicles.

But an important step was overlooked during its implementation 30 years ago. The number of vehicle registrations in the past affects the quantity of certificates of entitlement (COEs) available in the future. This problem should have been addressed at the start and adjustments made then to smooth the supply.

Instead, this peak and trough situation led to wild expansions and contractions of physical premises and manpower requirements.

During boom times, car dealers rushed to acquire and renovate new showrooms, and recruited salesmen and service mechanics.

When the slump came, staff were retrenched. The technical training of mechanics went to waste, and quite a number of them ended up working in building maintenance.

The situation has been allowed to continue for three decades, resulting in tremendous wastage of real estate and human resources.

On smoothing out the 10-year cyclical COE supply pattern, there are many merits to Mr Tan's call to divide the total vehicle population by 10 and to take one portion of that (with adjustments made as and when necessary, taking into account actual deregistrations) as the vehicle quota for each year.

Such a system would allow better facility, manpower and career planning, eliminate wastage in other areas and curb speculation.

I remember that when I was working at a local motor dealership, I had great difficulty helping representatives from foreign factories comprehend that in Singapore, some one-year-old cars were worth less than identical three-year-old cars.

They were surprised to learn that it made economic sense to deregister perfectly good three-year-old cars because owners could get identical brand new ones in exchange, and perhaps have some money left over.

This has happened before and, unless the rules are changed, could happen again.

Also, with peaks and troughs in supply, uncertainty sets in, leading to speculation and manipulation. There has been a lot of this in the COE market. It would be greatly diminished if the vehicle quota system became much more predictable.

Lee Chiu San

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