Motorcycle COEs

MP Pritam Singh

Mr Pritam Singh (Aljunied): A Bloomberg article late last year put it aptly. Singapore’s reputation as one of the world’s most expensive cities now extends to one of its cheapest modes of transportation: motorcycles. Many Singaporeans who earn wages at the lower deciles rely on motorcycles for transport, gig work or undertaking deliveries.

In March last year, LTA attempted to arrest high COE prices by increasing the deposit for motorcycles COE and halving their validity period from six months to three months. These moves did not arrest the rise in motorcycle COE, which rose to more than $13,000 in November last year. Clearly, more needs to be done.

In response to last year’s changes, the Motorcycle Trade Association suggested raising the COE bid deposit to $2,000 and reducing the COE validity period to one month. Can the Ministry share if it has looked at this to further manage motorcycles COE premiums?

Secondly, in years past, LTA had transferred motorcycles COEs to the open category. At one point, the number of motorcycles COE transferred to the open category was up to 25% before being reduced to 10%. This practice was ended around 2017. Would the Government consider redesignating some open categories COEs to motorcycle COEs for reasons of equity and fairness for our low-income Singaporeans and of course, the gig economy landscape?

Thirdly, an important but seldom discussed aspect of high motorcycle COE prices revolves around the largely unregulated motorcycle financing ecosystem. The fact here is that it is the motorcycle traders and sellers that overwhelmingly offer in-house financing. In some cases, the interest-bearing component of such loans can be oppressive for our motorcyclists. High COE prices mean motorcyclists will require more financing to buy motorcycles. There have been concerns expressed about how the prospect of offering such financing in and of itself provide an opportunity to profit from financing, even if a motorcycle is prematurely returned before the loan is fully settled since the unused portion of the COE can be redeemed.

Do high COE prices for motorcycles create a perverse incentive for some motorcycle finances to drive up motorcycles COE prices in a largely unregulated space? Would MOT look at motorcycle finance as an area of deep study and review to ensure that motorcycle riders – almost 70% of whom ride Class 2B motorcycles and who are more than likely earning well below the median income – are not unfairly penalised because of a lack of Government regulation?

Ministry of Transport
2 March 2023

The Chairman: Clarification. Mr Pritam Singh.

Mr Pritam Singh (Aljunied): Thank you, Chairman. Minister, my cut to MOT this year is a follow-up to my colleague, Mr Faisal Manap’s Adjournment Motion of October 2021 on motorcycle ownership and his other Parliamentary Questions (PQs) on high motorcycle COEs.

I note the Minister’s point about finance as a service offered by many motorcycle dealerships and I recognise the role that it plays. However, the prospect of speculative bidding of motorcycle COEs has always been a concern of the public. I will not go through the newspaper articles that can substantiate this concern.

The Minister said that the violations of motorcycle financing would be subject to the Hire Purchase Act. But the Hire Purchase Act comes under the purview of the Ministry of Trade and Industry (MTI). In view of high motorcycles COE prices, does MOT, for example, monitor the number of repossessed motorcycles and would it consider doing so to have a better fix on the impact of motorcycle financing through dealerships today?

To this end, would the Ministry consider a broader study into alternative financing options for our motorcycle riders, such as through cooperatives, that could bargain for not just better block-financing rates from financial institutions, but also reduce the arbitrage component of some loans that are in turn offered by some motorcycle finance companies today?

My second clarification is very short. It pertains to the second point of my cut. Does the Minister have a perspective on the total number of motorcycle COEs transferred to the Open Category over the last 10 years? I use 10 years because it is the lifespan of a COE, even though I note that the practice had been stopped in 2017.

Would the Ministry consider an increase in motorcycle COEs to make up for the COEs transferred to the Open Category in the past?

Mr S Iswaran: Mr Chairman, I thank the Leader of the Opposition for his questions. Actually, these two questions, straddle the gamut of almost all the issues; so, they are deceptive in their apparent simplicity. But let me endeavour to respond.

Perhaps, I will start with the second point on COEs and allocation. I think what the Leader of the Opposition is driving at is whether there is a way to re-allocate some of the old COEs. I think that was the point he made earlier because of the old system, which was discontinued in 2017.

12.30 pm

First, let me say and I want to reiterate this point. I omitted to mention Mr Fasial Manap’s Adjournment Motion, but as I said, I do not think any one party here has a monopoly on the care and concern for motorcycle owners. We all do. We are all endeavouring to help. And the question is, how to best achieve that.

Secondly, let me make the point that we need to be clear about what is the overall intent and structure of the system. So, I start with the vehicle growth rate. We have taken an important albeit difficult decision that the vehicle growth rate will be zero. We have done this because of the overall interest in terms of the liveability of our city and ensuring that even our roads, the flows, the vehicular flows can be sustained, going forward, taking into account road development and all the other modes of transportation that we are developing.

So, that is the first and important consideration, baseline point, that vehicle growth rate is zero. Why is that important? It is important because the moment we agree on that and – I am assuming the Leader of the Opposition agrees with that as a principle. Because if you do, then any mechanism to re-allocate COEs is basically a zero-sum exercise. We have to take it from some other category in order to give it to a more critical category. The Leader of the Opposition’s proposal is to take it from, I think, Cat E, or – I cannot remember where.

But there have been similar arguments made for other categories – whether it is for Cat A, whether it is for Cat C, commercial – in this House. So, how do we decide then where to take it from, where to allocate it, how much to allocate and how do you measure that the outcome has been successful? Because, clearly, the intent here is that – and I am reading into the Member’s comment – unless prices soften, the desired objective has not been served.

But we have to look at any change we make to the COE system holistically for all the reasons I have just highlighted.

So, to propose one particular dimension for modification without looking at the systemic implications, I think would be remiss on our part.

But as I have said, having said that, we have been prepared to take measures. We have, not just in terms of the systemic measures to help motorcycle owners in terms of costs, but also some of the more recent measures to curb any potential speculative behaviour on the part of motorcycle dealers. And we remain ready to do more.

As I have pointed out, the most recent couple of months has been quite telling because there have been 450 TCOEs that have been forfeited. Which means at a certain point, there was pushback in the market and now the dealers have to let them go. And this re-enters the supply. And, as I said, I hope buyers and dealers will take note of this when making their decisions on bidding and buying for Cat D.

The first point that he raised was on the financing elements. First, we should all be very focused on our core mission. And the mission in LTA and for MOT is to make sure that we have agreed on a policy for managing the population of vehicles and we have an allocation mechanism through the COE, and we should ensure that that is working to the best of our ability.

Having said that, financing is essential because most buyers of vehicles, generally, do need financing assistance. Whether we can study further, whether there are any other alternatives, I would say that this is actually better left to the market and to industry players to respond. Because in the end, LTA or the Government is not in a unique position in any way or even in a position where we have special insights into this. The practices – and the Member himself has highlighted, there is a cooperative and so on – the mechanisms exist, in other context perhaps. And it is really best left to the market.

What we will do, however, is even though the Hire Purchase Act is under MTI, if there are issues about practices that contravene the regulations, these are areas that we will want to make sure they are investigated thoroughly, because they do affect the effective functioning of the COE market.

The Chairman: Mr Pritam Singh.

Mr Pritam Singh: I thank the Minister for the considered reply.

 On the point of how do you re-allocate, I recognise the difficulty in doing so, particularly in the context of a zero vehicle growth policy. But I think the other context to consider, and I make this appeal to the Minister, is the landscape with regard to what has happened since 2017 and today, insofar as a burgeoning of the gig economy and the need for lower-income Singaporeans to have an affordable mode of transportation to deliver food and whatever else, has changed.

 So, that was the context in which I raised the argument that covered a previous policy of LTA, which was to take COEs from the motorcycle Cat D and put it to the Open Category. And I was wondering whether there could be some considerations because of the landscape, to see whether it is feasible to consider a transfer back. And in my cut, I use the word “equity and fairness”. It is not meant to dilute the Minister’s response of the larger task of re-allocation from other categories as well. I take that point.

 On the point of the market, indeed, ultimately, that is the bedrock that has to sustain financing. But in view of the Forward Singapore exercise, I think there was an exercise which looked at the prospect of cooperatives partnering businesses to better manage finance. I am wondering whether the Ministry could nudge our cooperatives to consider providing loans for lower-income Singaporeans so as to ensure that the arbitrage that motorcycle financers gain is not overly large, to the detriment of lower-income Singaporeans who need these bikes in the first place.

Mr S Iswaran: Mr Chairman, on the point on re-allocation, some data points are useful. Over the last 10 years, the population of motorcycles in Singapore has been around 130,000 to 140,000. So, it has been at about that level. It has not been so volatile.

 And when we talk about allocation to Cat E, it is not just from Cat D. And we continue to have allocation from Cat A, Cat B and Cat C into Cat E, which then gets recycled.

 So, if we talk about changed circumstances that warrant considerations specifically for motorcycles because of, say, delivery, the same might apply to Cat A cars, for example, because they are used for Grab, or those kinds of platform services.

 What I am trying to illustrate is, I do not think we have a disagreement in terms of wanting to help. But we have to be very clear that in our desire to do so, we do not throw the baby out with the bathwater. Because it is a system that in general has worked. But let us also be clear: why we are discussing this today is because the prices have gone up. When the prices were lower, we were not debating these issues in the same way.

 So, we have to understand clearly what is the driver, what is causing it, be prepared to respond if, in fact, there are structural issues or systemic issues that we think need to be resolved. But I am just advocating having a care and also trying to present the larger perspective.

 The second point is, the point has been made, by the way, on “equity and fairness”, and I think “equity and fairness” depends on where you stand and whom you are advocating for. And I can assure the Leader of the Opposition that I have had many who have advocated for other groups with equally meritorious claims for favourable allocation. 

So, I think it is a subjective discussion, one that we need to take into account, we need to take serious consideration of, in terms of the circumstances. But we should also make sure that if we are going to make a systemic change, it is one that we can then not just defend but also make sure that we can sustain it in the long run because it is warranted, in the manner that we have just discussed.

 On the possibility – so, now, it is beyond MTI; it has gone to the cooperatives and whether we can ask them. I will dutifully convey the message. But I just want to come back to what I said at the start, which is that, in the end, there are various market mechanisms. We should encourage it, I fully agree with that. As the Leader of the Opposition said, if there is an arbitrage possibility and if the market is functioning well, then somebody would take advantage of the arbitrage and come in – whether it is a cooperative or another finance business or whatever. So, I just want to make that point.

Ministry of Transport
3 March 2023

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