COEs and the Ownership of Cars

The COE system was introduced over 20 years ago, but cannot shake off controversy. Never has so much been said by so many over so few pieces of paper.

Most people accept the logic in restricting the number of cars on the road and the need to keep traffic moving smoothly. But no one likes to pay more. As a result, we have heard many suggestions on how to change the system, usually with a view to keeping COE prices low for some. I say “some” because there is no one suggestion that benefits everyone who wants a car. So, we have had suggestions of balloting for COEs or allocating based on need. But these suggestions are also not without difficulties, such as defining “need” or determining how one person's “need” is greater than another's. Do those with elderly parents have a greater need than those with infants? What about those who have to work odd hours, or need to move around Singapore as part of their jobs? So long as we agree that car numbers must be controlled, there will be no solution that pleases everyone.

The real question is what is the Government's role when it comes to determining who gets a car? The problem is that there has been no consistent policy when it comes to cars.

When then Minister Dr Yeo Ning Hong introduced the COE system in 1990, he said that the rationale for having categories based on engine size was to “benefit the lower and middle income owners”. In other words, there was an element of social equity in the system. That rationale appeared to be premised on the fact that back in the 1990s, luxury car makers generally produced cars with larger engine capacities. But this has not been the case for some time. European emission standards and the introduction of forced-induction techniques (turbocharging / supercharging) has seen luxury car makers move into the small-car market. So, today, luxury car makers dominate the small car category as well. Lower and middle income owners no longer benefit. The original purpose of engine categories no longer applies. So, why do we maintain this system?

The latest changes to the ARF reaffirm the principle of social equity, making those who purchase large, luxury cars pay more. That is the intention, but what is the likely consequence? It may mean driving more people to the small car market, which will push up COE prices for that segment. And the latest MAS curbs on car loans will make it difficult for low and middle income persons to own cars in any event.

So is there a principle that governs car ownership? I don’t see any. I think we get into these difficulties because we try to fit different and sometimes conflicting principles of free market, social equity and financial prudence. It does not work, raises expectations and ends up frustrating many.

I therefore ask the Minister to review the system and the principles of COE allocation. It’s time to pull the handbrake on the current COE system, and send it back to the workshop for a complete overhaul. First, let us have simple and clear objectives which most, if not all, can agree to. Since we cannot please everyone, I suggest that instead of focusing on who gets a COE, we should look at what kind of cars we want to have on the roads. What kind of car exacts less cost on the rest of us, and benefits everyone more? The answer is simple: those which harm our environment the least.

Car should simply be categorized by their emissions, or other environmental factors. The Europeans have done this well. They are car manufacturers. Over time, they have enforced higher emission and other standards for their cars. The result is that European car manufacturers have had to step up their game, and today, most Europeans buy cars which are well engineered, cleaner and more fuel efficient, compared to say, American cars.

We do not manufacture cars, but with the COE system, we can effect similar change. The engine capacity of cars we buy should not matter. Neither should it matter if they are diesel, petrol, LPG or hybrid. Such cars occupy the same space and contribute to congestion. But it will make a difference if we promote cleaner, more fuel efficient cars. Therefore, substantially more COEs should be allocated to those which are environmentally friendlier, and a smaller number for “dirtier” cars. This will set a clear and defensible policy, and a send a strong message about what we value. It will also indirectly help those who can only afford to purchase smaller and cheaper cars as these tend to have lower emissions and be more fuel efficient.

My second point is about the timing of changes to policies. We have a habit of springing them suddenly on people, such as the recent curbs on car loans, and property cooling measures. This makes it difficult for individuals and businesses to plan, and where plans are affected, it causes frustration and resentment. Why can we not give reasonable warning so that everyone can plan and make informed choices?

I can predict the response - if we had given 6 months’ notice before imposing the loan curbs, everyone will rush to purchase a car in those 6 months. Yes they may, but so what? Those who rush in will know others will do so as well, and they should be prepared to pay more. Others can choose to wait the market out, in the expectation that prices will fall. For the rest of us, there will still be the same number of cars on the road.

The concern is for those who may over-extend their finances. That argument is over-stated. First, it will affect only a small group of car buyers because only so many cars can be purchased in that period. Second, even when there were no loan curbs, there were no significant numbers of defaults for car loans. Thirdly, and more fundamentally, Government should a step back and let people make their own financial decisions, even if it turns out to be a bad one. We cannot protect Singaporeans from every poor personal decision, and even if we could, we should not. Worse still, by acting without warning, the Government has, in the name of protecting some Singaporeans, affected others. It has caused frustration among individuals and companies planning to buy a car and who could well have afforded to service a larger loan, and businesses selling or holding stocks of cars.

We should give everyone more time to understand the new rules and their implications, work out their options and make considered and informed decisions. Such moves by the Government have real consequences on the present and the future plans of Singaporeans. The least we can do is signal early before changing lanes.

Executive Condominiums

The key to assessing the success of any policy is to distinguish the will from the deed. In other words, do not look at what the intention behind the policy is, but what its effect is. Nowhere is that more relevant than in public housing.

As the salaries of Singaporeans, especially professionals, rise, and as they marry later, a good number of couples will have combined salaries which will disqualify them from buying a new HDB flat. But at the same time, they find private properties out of reach. Executive Condominiums are intended to help this growing group.

The problem is that ECs are also an attractive financial proposition. Minister Khaw recently described the scheme as offering residents a Lexus for the price of a Corolla . That is a good analogy. But because it is such a good deal, those who could otherwise have afforded to purchase private property, are buying ECs as well. Some who cannot afford it are doing it with the help of parents or others.

The critical question therefore is whether ECs are only being sold to the class of people they are intended to benefit. The selling prices of ECs suggest that they are not. This is best illustrated by the recent sale of $2m EC penthouses. And even for more regular-sized units, prices have risen in tandem with the private property market.

You cannot blame Singaporeans for taking advantage of a good deal. Neither can you blame developers for high prices – they bid competitively for the land, they take the risk and therefore, they want to maximize their profits. Developers are not the least bit concerned that their units may not be affordable to couples who earn up to $12k a month, because that is not their only pool of buyers.

This also means that tax payer’s monies are effectively being used to subsidise the purchase of ECs for those who do not need a subsidy, and no doubt in some cases, to make a profit. Subsidies should be used to help Singaporeans buy homes, not make windfalls.

The Ministry has implemented measures to deal with some undesirable aspects, such as capping the size of EC units. However, that does not address the problem I have highlighted.

I accept that it would be difficult for MND to investigate the financial backgrounds of purchasers to assess if they belong to the class of Singaporeans we are trying to help. But if we cannot ensure that the objectives of the EC policy can be met, perhaps we should reconsider having the policy in the first place.

The problem is this concept of hybrid housing – public in some respects, private in others, and in the case of ECs, public evolving to private. Again, I understand the intention behind these policies to give Singaporeans more choices, and better quality of housing if they can afford it. But what is the result? In my division, there is a running battle between the residents and the developers of The Peak (DBSS) over quality issues. One of the residents’ complaints is that HDB is not more active in resolving matters. I can understand why HDB is not – because the contractual relationship is between the purchaser and the private developer, and HDB has limited powers to intervene. But as far as the purchasers are concerned, they bought these flats under HDB rules and restrictions, and deserve more help by the HDB.

The intention of DBSS was to provide Singaporeans with better quality of flats. What is the result? They pay high prices for flats, but end up angry and disillusioned; unhappy with their homes. They end up blaming those who were trying to help them.

I therefore urge the MND to government to focus on providing good quality public housing for the masses – for the benefit of most, Singaporeans. MND can offer a suite of choices with different sizes and amenities, but retain ownership of the process and the legal relationship with the purchaser. Let us keep separate private and public housing, and not have one morph into the other, so that everyone functions and benefits at the same level. Those who aspire something different should look to the private market.

At the same time, Singaporean couples who earn more than $10,000/mth should also have the option of public housing. To prescribe salary limits is too blunt a tool, as different people have different circumstances. Some couples have to take care of children and up to four elderly parents. There are medical and other costs to consider. Committing themselves to a large loan forces both to continue working, and does not allow the option of one of them stopping work or working part-time to spend more time with family. It also assumes that both will be able to keep their jobs for the tenure of the loan, which may not happen.

I therefore repeat the call I made some years ago to lift the salary limits for public housing, or at least set the upper limit at a much higher level. Since then, MND has raised it from $8,000 to $10,000. I urge it to go much further. Give more Singaporeans the choice of going public. Some may prefer to keep their expenses low. And at the same time, prescribe conditions which discourage gaming of the system. We have introduced measures preventing owners of private properties from purchasing HDB flats. The rule should work both ways. Any person who decides to purchase and live in public housing to take advantage of subsidies, should not at the same time complain that he is being shut out of the private market.

Budget Speech

During the Budget Debates in Parliament today, I gave a speech on NS and the thorny issue of integrating our citizens, new and old, PRs and foreigners in our society. My speech stemmed from my proposal for a national defence tax which I mooted online a few weeks ago.

I shared with the House what I learnt from you. Ultimately, as I said, something needs to be done about the current situation. In my speech, I outlined some measures that the government could adopt: promoting integration, sharpening distinctions, introducing compulsory service for PRs and dealing robustly and effectively with those who seek to undermine our efforts and values.

I concluded my speech with a personal anecdote about how proud I felt to be a Singaporean when my friends and I were recognized in Thailand as Singaporeans because of the racial diversity of our group. Somehow, where integration is concerned, we have lost our way. However, we should not shy away from this topic. It is time for the Government to take the lead on the national debate on integration, and to do so boldly.

Here is the full text of my speech.

Together

I am part of the post-65 generation of Singaporeans, born here after independence. I served my national service in the infantry. I carried my M16, wore my No. 4 and ate what the SAF optimistically called “combat rations”. I spent time in the soil of the jungles of Singapore and Taiwan with other Singaporean males, who have become my friends.

I view my NS with pride, just as I am sure many Singaporeans do. NS is a common touchstone for us. We will never do anything else quite like it for the rest of our lives. Even decades later, we talk about it with friends. It brands us as Singaporeans. When people talk about a “Singaporean core”, NS is one of the ingredients that lie at the heart of it.

Last month, I wrote a series of posts on my facebook page suggesting that we impose a national defence tax on non-citizens as a way of sharpening distinctions between citizens and non-citizen residents, and using the proceeds to benefit our NS men.

I was happy that my posts sparked a lively debate. It brought into focus the larger issue of whether Singaporeans, new citizens, PRs and foreigners are successfully integrating in our society, and the implications for us if they do not. The problem is that we have largely dealt with these issues on a superficial level.

What I Learnt from Singaporeans

I would like to share with this House some things I have been told online and in person in the course of the debate. I believe they represent the views of a good number of Singaporeans. They raise serious issues which I hope the Government will look into.

First, many Singaporeans recognise and appreciate the contributions of new citizens, PRs and foreigners. They have no desire to discriminate against them. They acknowledge that this country would not be the success that it is without their contributions.

Second, many want to see new citizens and PRs genuinely integrate better with Singaporeans and be part of our society. We want them to demonstrate that they regard this land as their home; that they believe in our cause; and that they too have a stake in Singapore’s future. What grates most on our nerves is the thought of those who seek the privilege of citizenship and permanent residency do so purely out of convenience or economic gain, and that they will abandon us at the slightest risk or sign of trouble.

That is why National Service is such an emotional topic. Doing National Service, or giving an undertaking that your son will do it, is a tangible demonstration of that commitment. Many talk about shedding blood, sweat and tears. But it means more than that. It forges a common bond which is unique to us, and in some ways, helps define who we are. There is also a real financial sacrifice. For men from poorer Singaporean households, it means two years of earning a nominal allowance when they could have joined the workforce and helped supplement the family income.

So it disturbs us when we perceive others avoiding NS by playing fast and loose with the rules, and taking easy rides in the system. That is the true cheapening of National Service.

Thirdly, most demand that those liable to do NS must perform their duty. It is not enough that NS-dodgers pay a penalty and are barred from returning to Singapore. We rather that they stay and serve with us. But we must accept the reality that some PRs will arrange for their sons to leave when they reach a certain age. Not a single person who has posted or given their views believes that the current sanctions against this are adequate.

That was why I proposed the National Defence Duty - as a practical response to a practical problem. We cannot force people to remain in Singapore who do not want to stay here. But we can make it so costly that they would think twice, three times before taking PR status or arranging for their child to dodge NS. As with all proposals, some liked it; some criticised it; some felt it did not go far enough. Some even accused me of proposing that PRs who were liable for NS be allowed to pay their way out of their obligation. Of course, I never made any such suggestion.

But one thing most appeared to agree on: something needs to be done. The status quo will not do.

An Action Plan

This issue should be tackled as part of a national effort to promote integration. We can and need to do a number of things.

First, at a macro level, we need to explain better the importance of keeping Singapore an open society with an open economy. “Singaporeans first” does not and cannot mean “Singaporeans regardless”. These issues are complicated, and frankly, we do not do a good job explaining things. This is sad because we have such a compelling story to tell. Neither will the approach that people should trust us because we know what we are doing. We cannot take the people’s trust for granted.

Second, we need to convince Singaporeans that Singaporeans remain central to Singapore and its future. This year’s Budget takes a step in that direction. More is being done for members of our Singapore family who are in need of more help – increasing incomes for low wage workers; securing their children a better education; helping the elderly age with more dignity. More is being done to share the prosperity that Singapore has achieved. We become a better, stronger society when the lot of all Singaporeans are improved.

Thirdly, while foreigners and PRs are important, we must also demonstrate that there are privileges in being a citizen. We have thus far largely dealt with this on a piece-meal basis, with different Ministries announcing changes or measures at different times, whether it is securing places in primary schools, differentiating medical fees or property ownership. We should have a comprehensive review of all these measures and look at how we can make changes on a fair and principled basis. Some have said that such a move would be xenophobic. By that definition, any privilege given to a citizen is xenophobic. Of course, it is not. It is legitimate for a government to draw distinctions between its citizens and non-citizens. In any case, I firmly believe most Singaporeans are not xenophobic. But they are genuinely unhappy because of perceived unfairness of treatment. We in this House need to address this squarely and rationally. If we ignore this, we will only give cause and strength to the less rational voices.

Fourthly, we should review our approach to granting citizenship and Permanent Residency. It has to be more than satisfying criteria and completing forms. I have a constituent who is Singapore citizen. His wife, a Malaysian, gave birth to their son in Malaysia, and he became a Malaysian citizen. The boy is now about 20 years old, not well educated but hard working and wants to improve himself. He has been working as a cook in Singapore for about 2 years on a work permit. The boy wants to live in Singapore with his father, become a citizen and do NS. His application for PR has been rejected several times. Why? Is it because of his lack of education? But he is the son of a Singaporean, who wants to live with his father and do NS, and does a job which Singaporeans apparently shun. Why do we regard him as less qualified to be here compared to sons of PRs, who may or may not choose to stay and do NS when they come of age?

Fifthly, we should have new citizens and PRs perform some form of compulsory service. If NS is not suitable by reason of age or other circumstances, other forms should be introduced. This can be for short periods annually, much like how Singaporean men do reservist training. The point is not to discourage foreigners from sinking their roots here, but to emphasise that they now have a stake in this country as well. One commenter on my facebook page mooted the idea of having them serve in the Volunteer Special Constabulary (VSC). It is worth exploring. There are even practical benefits as it helps with the current manpower shortage in the Home Team. In fact, there are currently 52 PRs serving in the VSC. At a recent award and appreciation ceremony, I met one of them, Cpl (V) Yanase Yoshitaka, a Japanese who has lived here for 12 years. He was proud to serve in the VSC, and told me that he wanted to become a Singaporean. Others can do the same. Give them a chance. They may surprise us.

Finally, we need to have a more robust and effective response to those who undermine our efforts to integrate. I have spoken about PRs who send their sons away to avoid NS. We also need to deal with the allegation that some employers favour hiring foreigners at the expense of Singaporeans, or retrench Singaporeans before releasing their foreign staff. The story is always different depending on who you speak to – employers who say they cannot find Singaporeans despite their best attempts or that Singaporeans are unrealistic about pay and benefits; Singaporean employees who say they have been discriminated against because their employers want to hire cheaper foreigners or help their fellow nationals.

I know of cases where my constituents have gone to the CDC looking for jobs, only to be told that nothing was available, or to be sent on interviews which proved a waste of time. This should not be happening in our tight job market. What is the real problem? Let’s get to the bottom of it and show where the truth lies.

Some have mooted rules or laws to compel employers to prove that they cannot find Singaporeans before they are allowed to bring in a foreigner. We should find simple ways of doing this. The CDCs and NTUC can help by offering a comprehensive job matching service, not just for low income workers, but PMETs as well. To make sure that efforts are sincere, we can have them certify that job matching has failed before an employer can make an application for a foreign worker. In this regard, an employer who has proven that he is unable to secure a Singaporean for a reasonable wage should be given some leeway to bring in foreign workers. For some industries, you can only improve productivity so far, and workers are needed to keep the business going.

But it cannot all be one way. Singaporeans must also bear responsibility for themselves. Singaporeans who unreasonably refuse to take up jobs or to improve themselves should not expect to keep getting support from others, whether through the Budget or otherwise.

One Day in Bangkok

Integration is a long and complex journey. It was something that Singapore did very well. In one of my first speeches after becoming an MP, I told of an encounter which made that clear to me. In 1991, shortly after my final university exams, I undertook a backpacking trip with some of my friends around Asia. On a hot day in Bangkok, my two Chinese friends and I walked towards a street vendor selling drinks. Before we could say a word, he looked at us and said “Singapore”. We asked him how he knew. He said: “Different colour, walk together; must be Singapore.”

We laughed at the incident, but you know, I have never felt prouder being a Singaporean. I hope always to feel that way.

Conclusion

We have lost our way somewhat on integration. It is not too late to get back on the right road. The Government must lead the national debate on immigration and integration. It should come up with a comprehensive package which Singaporeans, PRs and foreigners can accept as sound, compulsory community service, monetary and non-monetary measures, carrots and sticks.

We should not avoid this sensitive topic, but embrace it as part of the evolution of our young country. It is a fallacy to think that a country can stand still, frozen in time, and never change. Change is inevitable, and change can be a good thing, provided we manage this process fairly and rationally, involve Singaporeans, and most importantly, act in the interests of Singapore.

We are very different from the Singapore of the 1970s and we will be a different Singapore in 2030. Nonetheless, we must remain a multi-racial, multi-religious society defined by values embodied in our pledge of unity, democracy and equality to achieve happiness, prosperity and progress for all.