Jan 16, 2014

    Fairer way to allocate COEs to the population    

    MANY residents of Singapore have expressed their disappointment concerning the minor tweaking of the certificate of entitlement (COE) system, which caps the brake horsepower of cars registered in Category A to 130.

    Suggestions to revamp the entire COE system were put forth and debated in forums, but none was taken up.

    The current COE system favours only the wealthy.

    In a free-market economy, the market forces of demand and supply will allocate resources in the most efficient way possible.

    However, in this case, the Government restricts the supply of COEs to consumers. This has eventually resulted in an escalation of the price of COEs which was brought about by a substantial decrease in the supply of COEs.

    People purchase cars for different reasons. Some purchase them because they simply require it for work-related purposes to travel and meet clients. This group of people can include salesmen, property agents and even financial advisers.

    Another group consists of families with young kids and elderly people who require a car to get around more conveniently, as opposed to taking public transport.

    There is yet another group of individuals who purchase cars because they are car enthusiasts and love customising their rides.

    Last but not least, there is a proportion of affluent car buyers who use cars as status symbols.  

    The COE system severely penalises the first three groups of car owners, assuming that they are from lower- and middle-income groups. This is especially true for the first two groups of car buyers as they have a compelling need for a car.

    A Bloomberg news article published nearly three years ago reported that the cost of the COE alone then would have been enough to buy a new Porsche Boxster in the United States or a Mercedes C-Class in Hong Kong.

    This shows a huge discrepancy in price for the same product, albeit in different countries.

    My suggestion is that the authorities could have separate categories for various income groups and allow potential car buyers to bid for COEs according to their gross monthly per capita household income.

    This would definitely be a fairer way to allocate COEs to the population.