Certificates of entitlement (COEs)


 

Certificates of Entitlement (COEs) give Singaporeans the right to own a vehicle. COEs are integral to the Vehicle Quota System (VQS), a landmark scheme implemented to regulate the growth of vehicle population in Singapore which is among the densest in the world. The VQS determines the exact number of vehicles of various categories allowed on the road. Other measures to curb vehicle growth like raising taxes and fees do not have the advantage of knowing the exact increase needed to get a desired level. Under the VQS, vehicle growth could be pegged at 3% every year with the expansion of roads and highways taken into consideration. The VQS was implemented in 1 May 1990 and the first bidding under the system started on 2 April 1990. Public buses, school buses and emergency vehicles are exempted from this scheme. 

Background
As Singapore developed and Singaporeans grew affluent, car ownership became prevalent.  By the 1980s, there was a need to manage the rapid growth in the number of vehicles in relation to Singapore's road capacity.  B
etween 1975 and 1990, the growth rate of the car population was as high as 12% per annum before the recession of 1985.  To ensure that Singapore roads would be smooth flowing, the government undertook a combination of usage and ownership measures.  Usage measures includes parking charges and the Area Licensing Scheme (or ALS, and later the Electronic Road Pricing or ERP) while steps to curb ownership comprise vehicle taxes (such as the Additional Registration Fee or ARF) and excise duty.  To further control the growth of vehicle population at a rate that is sustainable by Singapore's road infrastructure within its land constraint, the Vehicle Quota System (VQS) was introduced. The VQS was the key proposal of the Parliamentary Select Committee on Land Transport, chaired by Professor Hong Hai, which released its report on 3 January 1990.  The proposal sparked much debate among Singaporeans, from the cocktail circuit to the coffee shops.

Description

The VQS was implemented on 1May 1990 and the first bidding started on 2 April 1990.  Under this system, each motorist (or company) who wants to own a car (or other vehicle) would have to bid for a Certificate of Entitlement (COE) for that category of vehicle.  A certain number of COEs would be released every month for bidding. Once successful and only when one owns a COE that registration of the vehicle could take effect. The vehicle entitlement is valid for only 10 years and is transferred with the ownership of the vehicle.

Central to the VQS is the outcome of capping the growth rate of the vehicle population at 3% per annum, compared with an average of 6.8% per annum in the three years prior to the implementation of the VQS. It was reported that without the VQS, the growth rate would have spiralled over the last 10 years and traffic would have grounded to a halt, adversely affecting Singapore's economic development and quality of life.


COEs bidding system
When the VQS was first launched, there was only Closed Bidding System where bidders would not know how much others had bid. The quota premium payable for each category was the lowest successful bid. The lowest successful bid price is derived by dividing the total amount bidded by the number of COEs released in a particular month. Those who had bid this amount or more would be entitled to a COE at the lowest successful bid price. However Closed Bidding System lacked transparency and led to great fluctuations in the quota premium payable. In June 1999, the COE Open Bidding system was designed, then tested and was carried out in June 2001 in tandem with the closed bidding exercise. Every month, half of the quota was allocated for open bidding and the other half for closed bidding. In April 2002, the COE Open Bidding System totally replaced the Closed Bidding System. With open bidding, bidders could monitor the current COE prices and revise their own bid.


Review of VQS

In 1998, a Government Parliamentary Committee (Communications) was appointed to do a review of the VQS, nine years after its implementation. The Committee presented its findings (published in the Report of the Vehicle Quota System Review Committee) to Minister for Communications, Mr Mah Bow Tan, on 2 March 1999.  The Committee affirmed the effectiveness of the VQS as one of the key pillars in Singapore's traffic management strategies and recommended that the scheme be retained.  The growth rate of 3% per annum will be fixed until 2005 and thereafter reviewed. 



Author
Marsita Omar and Nor-Afidah Abd Rahman




References
Land Transport Authority. (1999, April). Vehicle Quota System reviewed.
Journeys, 21, 14-15.
(Call no.: RSING 388.4095957 SLTAJ).

Land Transport Authority. (2005, June). Looking back: Developments to the Vehicle Quota System.
Journeys, 4.
(Call no.: RSING 388.4095957 SLTAJ).

Lee, W. (1990).
Quota system and the ARF/PARF scheme (pp. 1-11). Singapore: Ministry of Communications & Information.
(Call no.: RSING 388.049095957 LEE).

Bidding under car
quota system starts tomorrow. (1990, April 1). The Straits Times, p. 1.

Lam, C. T. (1990, April 10). Govt had to act fast to get quota system going.
The Straits Times, Forum, p. 28.

Tan, S. (1990, Feburary 11). Dr Quota on himself.
The Straits Times, p. 19.

Automobile Association of Singapore. (2002, April). The COE Open Bidding System. The Highway. Retrieved March 2, 2006, from www.aas.com.sg/features/archive/f04021.htm

ExpatSingapore. (1997-2006).
Cost of owning a car. Retrieved March 2, 2006, from www.expatsingapore.com/once/cost.shtml.

Singapore. Vehicle Quota System Review Committee. (1999, March). Report of the Vehicle Quota System Review Committee. Retrieved March 2, 2006, from www.lta.gov.sg/corp_info/doc/VQS%20Review%201999.pdf


Further Readings
Foo, T. S. (1998). A unique demand management instrument in urban transport: The vehicle quota system in Singapore [Electronic version]. Cities, 15(1), 27-39.



The information in this article is valid as at 2006 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.

Subject
Commerce and Industry>>Transportation
Urban transportation policy--Singapore
Automobile ownership--Singapore
Law and government>>Safety administration>>Land transportation

All Rights Reserved. National Library Board Singapore 2004.