the week: you wouldn't download a car
COE prices hit the lowest point in months; Singapore issues statement condemning the Houthi pirates in the Red Sea
Certificate of Entitlement (COE) prices have tumbled in the first month of 2024, hitting the lowest they have been in months. This is a result of the 6th November Parliament sitting where Minister Chee Hong Tat announced the cut and fill strategy, borrowing from future expiring COEs to fill current demand in the hope of lowering prices. This is not a new strategy: in May 2023 the LTA had brought forward 6,000 COEs ahead of their actual expiry to fill current demand in what was titled as a “one-time adjustment”, and even then then transport minister S Iswaran noted that he did not expect this to relieve the long term increase of COE prices, and that he expected that the long-term trajectory for COE prices to be upwards.
Minister Chee starts his answer to the Parliamentary Questions by justifying the zero growth strategy, presenting the 2 main arguments: first, to ensure that the roads are not over congested; second, to reduce carbon emissions in Singapore.1 The thing is, nobody is arguing otherwise: we all understand the need for the zero growth of COEs, in fact, I believe that the amount of cars on the road should be even fewer. The problem is what will take the place of cars? The obvious answer is public transport, a solution Minister Chee was eager to push in his speech. If you truly want to make public transport the premier means of transport in Singapore, then it has to be the most attractive option. The government to their credit espouses the same rhetoric.2
In a country where land is scarce, I agree that there needs to be limits to the amount of cars on the road. The COE is a way to allocate the limited amount of cars on the road. The question then becomes how best to allocate these cars? Is there a truly fair way to allocate these resources? A balloting system may be the most fair or equitable way to distribute the COEs, but do not forget that the COE mechanism is also a means for the Singapore government to generate revenue. Subject to the caveat that the Singapore public transport system continues improving to the point where it eventually becomes more convenient to take the train than to own a car (like in some areas of some major cities where taking public transport is faster than taking a car), I think that it is perfectly fine for cars to be considered luxury goods in Singapore, and therefore an auction system to allocate the COEs is justifiable and in this case the most equitable way of distribution. With an ever increasing population but a limited amount of COEs, basic economics of course dictates that the price will forever keep increasing.
What I don’t agree with are these stop gap measures that the PAP government enjoys deploying. Instead of addressing the issues they opt instead to perpetually kick the can down the road. Minister Iswaran was right: the prices will continue to go up. The PAP on their part refuse to rework or even tweak any of the factors that affect the COE prices, and all we get is more monitoring of the situation. One way I think which would allow the COE allocation to become more fair is a true blind auction system. These will be the following changes I propose:
A true blind bid - instead of revealing the current winning bid all bids will be blind and the lowest winning bid will be revealed after the auction closes. This will prevent car hire companies from sniping the bids by perpetually increasing bids to ensure they win;
There can be no revision of bids - since the bids are blind, there will be no need to allow for revisions;
Winning bidders have to pay whatever they bid, not the lowest winning bid amount - this will ensure that bidders will only bid an amount they are willing to pay;
A token administrative fee for losing bidders - this will ensure that all bids made are serious bids.
This system removes any kind of speculative bidding, and will ensure that private hire companies cannot snipe the bids. This system also allows the market and bidders to arrive at a price that they are willing and able to pay, while ensuring that the government does not lose out on any revenue from COE auctions.
The biggest problem for PAP’s cut and fill strategy is not only that in the short term there will be more cars on the road thus contradicting the zero growth policy, but by borrowing from peak years (meaning years where there are the most expiring COEs) to fill current demand, come the peak years themselves will there not be a shortage of COEs given that there will be more COEs expiring but not as many returning to the pool, since those were already used to fill previous demand? How can this be a working model for stabilizing prices in any way? But this is the hallmark of PAP policy making in the 21st century: it isn’t just borrowing from Peter to pay Paul, this is borrowing from Jayden Tan to pay Tan Ah Kow. The PAP is borrowing from the future to pay for the present, and we see this not only in this cut and fill strategy but in their public housing strategy as well.3
Of course there’s good reason for introducing these short term cooling measures that serve no real purpose in the long run: an election must be called no later than 23 November 2025, and could be called as soon as this year. A short term lull in COE prices could just be the good news the PAP needs to tide it over to the next election. And what do we call a policy which serves to appease the populace? That’s right.
In other news, Singapore has joined 13 other countries including the US to condemn the attacks by Houthi militants on commercial ships in the Red Sea. I spoke last time about the battle for good and evil, and this is no different to that. The Houthi militants are connected to the axis of evil in the same way Hamas is: they are both terror proxies funded by Iran.
I’m glad to see Singapore actually taking action and fighting back, though this comes at no surprise to me. The Red Sea is crucial to Singapore’s economy, after all as a port city any disruption to shipping logistics negatively impacts our economy. As typical of the Singapore government, they have chosen to vote for the ceasefire in Gaza, but now that Singapore’s bottom line is threatened and we might face some economic impact we have chosen to take a stand against terror in the Red Sea and the region. As expected, where money is concerned the government is finally motivated to make the right call.
As an aside, I can understand limiting the number of cars on the road will reduce the amount of carbon emissions, but I cannot understand that inane push for electric vehicle (EV) adoption By his own admission the “land transport system” accounts for about 15% of our total carbon emissions (not 100% clear what he meant by land transport system, does this include commercial vehicles as well? Does this include buses? Taxis? Private hire?). Switching from a internal combustion engine car to an EV only reduces the carbon emissions by 50%. This means should the LTA hit their goal of replacing all vehicles with EVs by 2040, we would only reduce our carbon emissions by 7.5%, all this at cost to the private citizen. This 7.5% is not even accounting for the additional emissions or environmental damage done when producing an electric vehicle compared to a gasoline powered car. It takes between 28,069 miles and 68,160 miles before there are any benefits. The average Singaporean car is driven 17,500km annually, or about 10,937.5 miles. Even with the charity of assuming that all households keep the car for the full duration of the COE of 10 years, EVs will need to be owned for anywhere between 3 to 7 years before they present a net reduction in carbon emissions compared to gasoline cars. But because of the COE system car owners will tend to change their vehicles after 10 years, which defeats the purpose of this supposed green initiative. Of course, once again passing the buck onto the Singapore citizen, just as they did with the charging of plastic bags. Never mind if the policy actually results in the most amount of environmental change, just so long as corporations are saved from actually doing anything, and the citizens are inconvenienced, the Singapore government under the PAP will implement it.
But still I question the government’s commitment. Why do the newer MRT lines have fewer cabins than the North East Line or the East West Line that came before them? I can understand the argument that the newer lines have lower ridership, and therefore require fewer cabins. What I don’t understand is why the stations are not built to be able to scale up for ridership? Why do the Circle and Thompson East Coast lines have stations which only allow for 3 and 4 carriage trains respectively? This does not allow for scaling up the amount of carriages in cases of increased ridership. If a station is built for an 8 carriage train, it can still accommodate a 3 carriage train if an 8 carriage train is not needed for the amount of passengers. If however ridership increases for a station which can only accommodate 3 carriage trains, adding additional carriages becomes unnecessarily difficult. The population of Singapore has been increasing, and if the PAP has their way will continue to increase. This makes me question the commitment to actually making public transport more attractive than owning a car.
What I mean is this: the current generation of home owners only enjoy such high prices because the future generation of home owners will have to pay much more for their socialized housing. Essentially the PAP has borrowed from the wealth of future generations to ensure that this generation of home owners will enjoy great increases in their housing values.