Wednesday 19 October 2011

Certificate of Entitlement.


The Certificate of Entitlement (COE), instituted by the government of Singapore since May 1990, is a program designed to limit car ownership and hence the number of vehicles on the country's roads. This system in effect requires residents of Singapore to bid for the right to buy a motor vehicle, with the number of certificates deliberately restricted.
The COE allows holders to own a car for a period of 10 years, after which they must scrap or export their car with financial incentives or bid for another COE at the prevailing rate if they wish to continue using their car for a further 5 or 10 years.From April 1, 2010, the COE quota calculation was amended. Under the new methodology, the Land Transport Authority (LTA) recycles the COE quota from the actual vehicle deregistrations in the most recent six-month period back into the system. Instead of an annual quota, figures will be revised every six months. For example, there are 800,000 vehicles as of January. Based on the allowable growth rate of 1.5 percent, there will be an additional 6000 COEs for sale every six months. On top of the number of vehicles deregistered in the same period (for example, 20,000) this means the COE quota for July to December will be 26,000.
In early October 2011, Singapore Minister for Transport Lui Tuck Yew has said that Singapore's annual vehicle growth cap would be cut further from 2012. In the first COE bidding for October 2011, the COE price for Cat B fell S$1,289 to S$63,600 while that for Cat A cars, which include taxis, rose S$2,283 to S$50,289. COE price for the open category - where the COEs can be used for any vehicle type but are normally used for cars - increased S$2,556 to S$65,058.The COE system does not factor into account why the person wishes to own a car by need. For example if a businessman was using the car to drive for business purposes then the usage of the vehicle becomes a element of the business model. Having high COE prices discourages growth of a business which is reliant on vehicular transport.
COE also impacts transportation businesses which have a fleet of vehicles.
Only by addressing why the owner of the car needs the vehicle can a more robust system be developed to cater for the public. If the vehicle was required for the person to commute in from say Malaysia then again this demonstrates that the person requires that vehicle as part of their life style and it is sad that such people have to pay a COE sum which amounts to more than the value of the car.
COE system also discourages growth markets such as accessories for cars and car restoration projects.

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