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Saturday April 28, 2012

Driven to despair, literally

Owning a car can impoverish a Singaporean by millions of ringgit by the time he retires.

COE has become one of the most disliked – and feared – three letters for Singaporeans, except possibly the State Treasury. It stands for Certificate of Entitle-ment, which Singaporeans must have if they want to buy a new car.

Demand for this precious piece of paper has been rising steadily for years to a level that is killing off the dream of many young Singaporeans to own a car.

In the latest bidding, the COE – each certificate is valid for only 10 years – recently hit S$91,000 (RM223,600) for a big car (1,600cc or bigger) – a sum that could buy a bungalow or a large farm in many Asian countries.

Even in Singapore, this amount can finance up to three people for a four-year degree course.

Even for a small car (1,600cc or below), the COE is S$64,200 (RM157,750). Ironically, the certificate often costs more than the car itself.

The scheme has a significant impact on the city’s rising cost of living, now ninth highest in the world. Transport affects almost every form of activity on the island.

It may also be a wealth destroyer.

A lifetime of buying and operating a car could impoverish a Singaporean by as much as S$2mil (RM4.9mil) by the time he retires, a prominent blogger calculated.

In fact, many of the 10,000 Singaporeans who emigrate abroad annually – 4,000 of them to Australia – say they do so for cheaper cars and houses.

My own case may give an idea of how it is life changing.

Eight years ago, I paid S$18,700 (RM45,950) for a COE to buy a new 1,800cc Japanese car that inclusively cost S$80,000 (RM196,570), the most expensive in the world.

I thought it ridiculously high at the time. It was nothing compared to what was to come.

Today, the same car costs S$157,500 (RM387,050) or nearly twice what it did eight years ago. In other words, for this price I could have bought two cars back in 2004.

It has made my model the dearest car in the world. A similar one in the United States is one-seventh the cost.

Since my COE will expire in two years’ time, I am faced with two choices: buy a new car that I can ill-afford or bid for another 10-year COE, which could by then exceed S$100,000 (RM245,765).

The third option is, of course, to abandon it and use the bus or mass transit like other Singaporeans?

That would have been preferred if my state of health permits it. At 72, with a weak heart and on peritoneal dialysis for failed kidneys, alas public transport is not possible for me.

Most of my trips are to and from hospital for treatment.

I will probably decide, if I’m still alive, to pay for a five-year COE extension at half the then prevailing rate (currently S$91,000) so I can continue to drive my old jalopy for five more years.

The ironic thing is that I will be paying the government thousands of dollars a month just for the privilege of using my own car.

To put things in perspective, the government had intended the scheme to reduce road congestion by putting a quota on new cars. Somewhere along the way, it became a great source of revenue.

Has it cut down car enthusiasm or traffic jams? Yes, but the success has been confined to peak hours in the business districts.

There are more than 500,000 private cars on the roads here – or 44 per 100 households.

Singapore has two-and-a half times more cars than Hong Kong, a comparable city. Without the COE, who knows how many cars would be using our roads – a million?

The government is not wrong in saying that without a quota the roads would be gridlocked at most times, given the rising wealth accumulated by so many.

Critics often call for an end to the COE, saying there are other less costly ways to contain road jams. Beijing, for example, has occasionally imposed alternate-day driving.

The Singapore authorities should impose higher levies on the second and third car, the same way it is doing in the property market to reduce the possibility of a bubble forming, some motorists suggest.

This would be a disincentive against over-consumption by the rich. “But since these measures are revenue-reducing, they are unlikely to be implemented,” the motorist added.

After paying a small fortune for a new car, the owner will then have to worry about Singapore’s Electronic Road Pricing (ERP), another money-draining project.

Nearly 70 electronic gantries are placed over busy streets and highways to tax car users.

My drive to the Singapore General Hospital, for example, passes four gantries and costs me some S$7 (RM17.20) at peak periods.

But the COE has worked to some extent in keeping down the number of cars in these ERP-covered roads.

The problem is pushed to the surrounding roads, which often inherit some of the congestion as cars make a detour through them.

In a recent report, the Wall Street Journal, in labelling Singapore as the ninth most expensive city in the world, said:

“Moving to Singapore? Start saving: The city-state is one of most expensive cities in the world – 42% more expensive than New York – topping London, Frankfurt and Hong Kong.”

In March, inflation was a high 5.2%, one of the highest in the developed world.

“What’s been messing things up are the COE prices,” said a foreign bank economist.

If they keep rising at the current pace, it will be difficult to bring inflation down.

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