The high cost of motoring in Singapore

Business Horizons, March-April, 1994 by Rex S. Toh

Technologically demanding, the cost of installing this combination of sensors, cameras, antennas, and computers will be approximately $100 million, according to latest estimates. In addition, the annual operating cost of such a sophisticated system of tolls is expected to be considerable. In a press statement issued in December 1990, the then Minister of Communications and Information announced that the ERP system will eventually be implemented nationwide. The prospect of turning the entire island into an intrusive network of microwave beams is indeed frightening. To be sure, to cover the high capital and operating costs, the government will look for evidence of "traffic congestion" everywhere to implement a tax. In other words, once Singaporean motorists enter their cars and leave their driveways, they will have to pay, pay, pay.

Weekend Car Scheme

In May 1991, Singapore implemented an unusual program called the Weekend Car Scheme to encourage the use of private cars only during noncongested periods. Under the rules, motorists are given financial incentives such as a 95 percent rebate on the annual road tax if they convert their cars to weekend cars. These can be used only from 3:00 p.m. on Saturday and the whole of Sunday and public holidays, and from 7:00 p.m. to 7:00 a.m. on weekdays.

Weekend cars are identified by red license plates fixed with tamper-proof special screws and coded seals. After the first offense, the minimum penalty for using a weekend car during restricted hours is equal to the full annual road tax, but for the more serious offense of attaching a false normal license plate on a weekend car, the minimum fine is twice the annual road tax. To accommodate emergencies, each weekend car is given five free daily coupons per year. Additional daily coupons can be purchased for $12 each.

Although the Weekend Car Scheme was implemented in response to public demand and was well-intentioned, it has become a public relations disaster. As it turns out, most of the weekend cars are either luxury cars now enjoying the, 95 percent rebate on otherwise high road taxes, or the second or third cars belonging to affluent households. Thus, the average Singaporean perceives the distributional impact as being unfair. To make matters worse, the Malaysian government has announced that it will not allow Singapore-registered weekend cars to use Malaysian roads during the hours of restriction that would have applied in Singapore - perhaps fearing they were registered that way for this very purpose. In other words, if I am a Singaporean who owns a Porsche, I will be tempted to register it as a weekend car in Singapore, then drive it up and down the Malaysian peninsula during normal hours.

GENERAL PRICING RESTRAINTS

Because traffic density in Singapore has been highest in the city center, as early as the 1970s the government embarked on an aggressive policy of restraining the rapid growth in the number of cars by increasing the cost of ownership. The system of taxation on cars is rather complex, with taxes and fees generally depending on the value and engine capacity of the car. For illustrative purposes, we shall consider only one car model.