Parliamentary Ministerial Statement by Minister for Transport, Mr S Iswaran on Meeting the Transport Needs of Singaporeans

1.     Mr Speaker Sir, several Members have filed Parliamentary Questions on the Certificate of Entitlement (COE). My Ministerial Statement will address Questions 1 to 7 for Oral Answer, as well as Question 25 for Written Answer, in today’s Order Paper, as well as related questions that have been filed for subsequent sittings. 

A Transport System for All

2.     Sir, I will preface my reply to Members’ questions with an overview of our land transport system. To be complete, any discussion on COEs must be situated within the broader context of our land transport system of which private cars are but one aspect. 

3.     Sir, to meet the transport needs of Singaporeans and enhance our living environment, we must address two key constraints - land and carbon emissions. Roads occupy 12% of our land, compared to around 13% for industry and 15% for housing. 

4.     Our land transport system accounts for about 15% of Singapore’s total domestic carbon emissions; we must make it much more sustainable as part of the national effort to achieve net-zero emissions by 2050. Pre-COVID-19, about 14 million journeys were made every day, across four modes – public transport, point-to-point transport, private vehicles, and active mobility. That is the scale of the challenge. 

5.     The Government’s aim is to build an accessible, inclusive, and sustainable land transport system that meets the needs of all Singaporeans. 

6.     The best way to achieve this is through mass public transport. It allows the greatest number of people to get to their destinations with the least land take and carbon emissions. Our rail network serves around 3 million journeys a day and takes up less than 1% of our total surface space. In contrast, roads take up 12% of our land, for 7 million journeys a day. This includes those made by cars, motorcycles, buses and PHCs. Compared to driving an internal combustion engine car, taking the train reduces our carbon footprint by 90%.

7.     That is why mass public transport is the core of our transport strategy; and our rail network is the backbone of our transport system. Today, 7 in 10 households are within a 10-minute walk of one of our 202 MRT and LRT stations. By the next decade, it will be 8 in 10 households. To achieve this, we are building an additional 100km of rail; almost a 40% increase from our current rail network. By 2035, we will have 8 MRT lines and 2 LRT lines, interconnected and reaching all parts of the island. 

8.     As we expand our public transport network, we are also ensuring that it is inclusive, affordable and sustainable. Today, all our MRT stations and bus interchanges, as well as 98% of our bus stops, are barrier-free. The work is ongoing. Public transport, as we have discussed many times in this House, is heavily subsidised. And our public transport fleet will fully comprise cleaner energy models by 2040. 

9.     We are also improving first-mile-last-mile connectivity with extensive infrastructure for cyclists and pedestrians. By 2030, the island-wide cycling path network will more than double to about 1,300 km. Through LTA’s ‘Friendly Streets’ initiative, we will work with the local communities to create more pedestrian-friendly facilities within residential neighbourhoods. 

10.    More broadly, LTA and fellow government agencies are integrating land transport and urban planning strategies. To enhance the liveability of our city by bringing jobs closer to homes; developing lifestyle and amenity hubs near transport nodes; and making public transport and active mobility convenient for the daily commute. 

11.    Mr Speaker sir, given the land and carbon constraints I have highlighted, going ‘car-lite’ is a key strategy that our agencies have adopted. With excellent public transport connectivity and active mobility infrastructure, less road and parking spaces are needed for general vehicular traffic. This is the ‘car-lite’ future that we envisage as we plan and redevelop our precincts – to prioritise pedestrians, cyclists, and public transport users, and lessen the need for and use of private cars. 

Point-to-Point Transport: Bridging the Gap

12.    Even amongst cars, there is a spectrum of choices. Shared transport, which includes both taxis and private hire cars (PHCs) providing point-to-point (P2P) passenger transport services, complements mass public transport. They provide a useful alternative to car ownership for those who may need access to car-like services, whether chauffeured or self-driving. Today, the P2P sector accounts for around 1 million, up from 800,000 daily journeys in 2012. 

13.    With zero growth in our car population, such shared transport, including car sharing services, allow for a more efficient and inclusive use of our roads, serving the needs of many more Singaporeans, as compared to individually-owned private cars. 

14.    The total PHC population has averaged around 70,000 since 2019, with some fluctuations due to COVID-19 and the subsequent re-opening of Singapore’s economy. As a proportion of the total car population, PHCs have remained at around 10% for the past four years. In fact, the period where we saw the fastest growth in PHC numbers was between 2015 to 2017, when it increased from 30,000 to almost 70,000. There was no commensurate upward pressure on COE prices in that period. Conversely, while COE prices have been rising over the past several quarters, demand from PHC companies has in fact been moderating. 

15.    PHCs are a flexible way to augment the supply of point-to-point passenger transport, giving commuters more choices while serving a much wider segment of society than private cars. We should be careful when making calls about imposing any caps, sometimes arbitrary, on the PHC population. That said, PHCs are a relatively new development – the P2P regulatory framework for example, only commenced in 2017 – and COVID-19 has caused some disruption in the market. We are studying this further to ascertain the effect of PHCs, if there is any impact, on the market. 

Private Cars and COEs

16.    On private car ownership, there are encouraging trends especially amongst our youth. According to a Straits Times survey, the percentage of youth who aspire to own a car has fallen from around 65% in 2016 to around 50% in 2022. More than 75% of the respondents cited ready access to public transport as the reason why they did not aspire to own a car. 

17.    Nevertheless, Mr Speaker Sir, we do recognise that there is still a desire to own a car – for some it is a necessity; for others a useful option; yet others, an aspiration. Hence, it is quite understandable that Members have raised questions on the Certificates of Entitlement, or COEs. 

18.    COEs are a key feature of our Vehicle Quota System (or VQS). The VQS is essential for us to achieve our zero-growth rate policy objective for cars and motorcycles. It is the principal tool to manage ownership, as recognised in the 1996 White Paper on creating ‘A World Class Land Transport System’. 

19.    The VQS fundamentally works through supply and demand forces to efficiently allocate a scarce resource – the COEs. The system also incorporates progressivity considerations by having different COE categories. In fact, when the COE system first started in 1990, there were four categories for cars. The number of categories was reduced to the current two in 1999, to address concerns over the relatively small quota supply and resultant volatility, and limited choices of cars in some categories. Category E, which is the Open category, was retained to allow for changing preferences and needs in vehicle types over time.

Recent Market Structure Improvements

20.    Mr Liang Eng Hwa has asked if there are plans to review the COE system. On the whole, the system continues to serve our policy objective of efficiently allocating the limited supply of COEs. However, over the years, the Ministry of Transport and Land Transport Authority have made various refinements to the VQS scheme, to ensure its relevance and efficacy without forsaking the core policy intent. The power rating criterion of 97kW was introduced in 2014 for the mass market Cat A, so that car COE categories are differentiated not by engine capacity alone. Last year, as more electric car models became available in Singapore, we increased the power output threshold for Cat A COEs to 110kW to accommodate mass market electric cars. On Mr Leong Mun Wai’s question, between 2018 and April this year, the median Open Market Value, or OMV, for Cat A cars for each year was just over half of the median OMV for Cat B cars in the same year. In other words, Cat B OMVs, the median, was about 75% higher, compared to the median of Cat A. So there is a clear differentiation, if not a complete distinction, between the two. We will continue to monitor and review the differentiating criteria between Categories A and B as technology evolves.

21.    Ms Mariam Jafaar and Mr Saktiandi Supaat asked about Cat D COEs for motorcycles. A key feature of the motorcycle market is that dealers bid and hold the temporary COEs (TCOEs) in their own name before transferring it to a motorcycle buyer. This provides convenience for buyers who can readily purchase a motorcycle. This is unlike the car market where bids are primarily in the name of the buyer. Prospective car buyers who need immediate access to a car, in other words the bids were not submitted in their names, can rely on Cat E COEs, where there is some flexibility. As I explained at my Ministry’s COS debate this year, about 450 Cat D TCOEs that were secured when prices were close to or above $13,000 were subsequently left to expire when COE prices fell. To Ms Mariam Jaafar’s query, the expired TCOEs were held by more than 50 dealers; of course those with a bigger market share contributed more, but there was a spread. The TCOE utilisation rates subsequently went back up, with the market correcting when it could not support the prevailing prices. This is what we mean by the market working as intended. In other words, it responds to price signals, upwards or downwards, and then there is a reallocation. Nevertheless, to improve allocative efficiency and deter any speculative bidding, we made further moves recently, to increase the bid deposit from $800 to $1,500, and to shorten the TCOE validity period from 3 months to 1 month. 

COE’s Driving Forces

22.    Let me now address some of the specific questions raised by various Members about car COE prices. 

Foreigners

23.    Dr Lim Wee Kiak and Ms Joan Pereira asked about the impact of foreigners. And I know this is a common query. The proportion of car COEs secured by foreigners remains low and has not changed significantly over the years. As I shared in January this year, from July 2020 to December 2022, on average, less than 3% of car COEs were allocated to foreigners. This number has remained stable. 

Multiple-Car Owning Households

24.    Another common query – there is no specific parliamentary question on this, but I know it is on members’ minds– is about multiple-car owning households. In November last year, I had shared with this House that as of 31 October 2022, of the 471,000 households that own cars, 12% own two cars, and less than 3% own three or more cars. The percentages remain about the same today. In fact, over the past decade, the proportion of multiple-car owning households has been steadily declining from about 19% of households in 2012 to less than 15% today. I had also, in a PQ in response to Mr Gerald Giam last year, pointed out that it is worth noting that multiple-car owning households live across HDB, condominiums and landed properties, including some households that own more than three or more cars.

25.    Mr Saktiandi Supaat asked about the effect of car shows and promotions. As consumers make their purchasing decisions based on a myriad of factors, it is difficult to establish a causal relationship between such car shows and promotions with COE prices. 

26.    So what then is the cause of rising COE prices? Fundamentally, the COE prices reflect demand for a limited supply of COEs. This is further accentuated, or exacerbated by the fact that we are now at the trough in the 10-year cycle of COE supply. Demand in all categories has remained resilient, especially as the economy recovers post-COVID-19. Incomes have also been rising over the long term. As was observed in Professor Raymond Ong’s article in The Straits Times on 7 May, the ratio of COE price to median monthly household income has fallen from 11 to 1 during the previous COE price peak in 2013 to 9 to 1 today in comparison to median income, the COE price is actually lower even though the absolute price is higher, because household income has risen. As household incomes continue to rise in the coming years, coupled with our policy of zero-growth in the car population, we must expect the long-term trajectory for COE prices to be upwards.

Supply Smoothening Measure

27.    COE supply in turn is determined primarily by car de-registrations in preceding quarters, which has been relatively low of late. Over the past few months, the Ministry of Transport has made several moves to reduce volatility in quota supply. Instead of just the preceding quarter, we first adopted the average of the preceding two quarters in end 2022, and now use the moving average of de-registrations in the four preceding quarters to compute COE quotas. These moves have helped to mitigate quarter-on-quarter volatility.

28.    We also expect the COE supply to start increasing substantially in the coming months as more cars reach the 10-year mark. Notwithstanding this, MOT and LTA have studied if there is more that we can do to smoothen the supply of COEs in Categories A and B, while adhering, importantly, to the cap on the overall car population over the 10-year cycle. 

29.    Consequently, as a one-off exercise, LTA will bring forward and redistribute the supply from 5-year COEs which are due to expire in the next projected supply peak. As these 5-year COEs cannot be extended and therefore have to be de-registered, LTA will be able to identify the exact number with certainty. This supply will be re-distributed over several quarters starting from the next bidding exercise. This move will increase quota supply in the next bidding exercise by about 24% in Cat A and 15% in Cat B. LTA will release more details shortly.

30.    Even as we make this move, I would like to emphasise two points. First, this will help to lessen, but it will not eliminate, volatility in supply. There will still be a degree of supply fluctuation due to historical factors and broader market conditions. Second, the long term upward trend of COE prices due to rising incomes and zero vehicle population growth will not abate. 

Conclusion

31.    Mr Deputy Speaker Sir, as we seek to improve the efficiency of the COE system with these measures that we have already undertaken over the years, we should not lose sight of our goal of becoming a car-lite society with accessible and inclusive transport for all Singaporeans. The COE system helps us to make our transport system more sustainable, and our living environment better for all.

32.    As Singapore develops and grows, Singaporeans’ transport needs will continue to evolve, and our transport policies must move in tandem while paying heed to our key constraints. The Government is committed to developing the necessary policies and infrastructure to build a ‘car-lite’, accessible, inclusive and sustainable transport system to meet the diverse needs of Singaporeans. It is part of our social compact, anchored by reflecting the values we hold as a society. Ultimately, our success in realising that vision rests in the commuting choices that every Singaporean makes every day.