Friday, October 23, 2009

On traffic congestion and car ownership

Car owners in Singapore do not have it easy.

First, it is costly to own and drive a car. Apart from the purchase price of the car itself, an owner has to contend with various fees and taxes (costing tens of thousands of dollars) imposed by the Singapore government, such as:
  • Registration fee: Currently $140.

  • Additional registration fee: Currently equivalent to the open market value of the car in question. This is costly. For example, the open market value of a Toyota Corolla Altis 1.6 Auto is $17,850.

  • Certificate of Entitlement (“COE”): To own a car, a person must first successfully bid for one of a limited number of such certificates released monthly by the Land Transport Authority (“LTA”). The certificate can be quite costly, typically costing thousands of dollars. For example, the recent 21 October 2009 open category COE cost $19,901.

  • Excise duty: Currently equivalent to 20% of the open market value of the car.

  • Road tax: Based on a formula that is pegged to a car’s engine capacity. For example, the current annual road tax for a 1,600 cc car is $744.

  • Electronic Road Pricing (“ERP”) tolls: This toll (currently costing between $0.50 and $4) is imposed each time a driver uses certain roads or highways during peak hours.
Second, traffic congestion, especially during peak hours, is a frequent occurrence in Singapore. Based on the figures provided by the LTA, as of the year end 2008, there are a total of 894,682 vehicles in Singapore. The average daily volume of traffic entering the city alone is 278,300 vehicles. And the average speed in the CBD during peak hours? A paltry 26.7 km/h.

The LTA is the governmental agency in charge of all road matters, and the main measures it has adopted to deal with traffic congestion in Singapore are:
  • COE: Through the issuance of the COE, only a limited quota of new cars are allowed each month. The high cost of the certificate itself also serves as a deterrence to would-be car buyers.

  • ERP: High toll charges are imposed along certain main roads and highways during peak hours in the anticipation that these will deter drivers and hence provide for smooth traffic.

  • Off-peak car scheme: Car owners under this scheme may drive their cars only during off-peak hours. In return for this compromise, they pay discounted rates for the COE and other vehicle related taxes.
Do these measures work? Well, to some extent, they do. Still, many Singaporean drivers will readily attest that these measures are not nearly enough to curb traffic congestion.

The problem is that Singapore is not only a small country, but also a densely populated one. Nonetheless, if you want to have smooth traffic flow, the solution is simple: either (a) build more roads or (b) reduce the number of vehicles.

So, can an already built-up Singapore build more roads? Yes. In fact, Singapore’s road density, i.e. road length per land area (approx. 4.75 km/sq km), is significantly lower than other metropolitan cities such as London (2 times denser at approx. 9.5 km/sq km), New York (2.5 times denser at approx. 12 km/sq km) and Tokyo (4 times denser at approx. 19 km/sq km). So how do we achieve a higher road density? By building multi-level roads and expressways, as Tokyo did. Presently, our roads and expressways are only single level for the most part. Just doubling the road level will ease traffic flow by half. Is there a downside to this? Well, some people may argue that multi-level roads and expressways are unsightly. However, this may be mitigated to some extent if properly planned, and besides, adding another level to an already existing expressway would not likely make it much worse.

The incumbent government, however, is unlikely to implement this approach for a simple reason – because building roads involves expending a large sum of money. In contrast, sticking to the status quo scheme of COEs and ERPs allows the government to collect a great deal of revenue – even though it does little to address the problem of over-congested roads.

Nevertheless, it may be worthwhile for the government to consider channelling the substantial funds amassed over the years from road related revenue (i.e. COEs, ERPs, road taxes etc.) towards building additional roads to ease traffic congestion and benefit the country. The use of road related funds for this purpose will ensure that there is no prejudice against taxpayers who do not drive.

The second way to deal with traffic congestion, is to reduce the number of cars. As highlighted above, the government attempts to do this by way of the COE quota system among others, with mixed success.

So how else can we reduce the number of cars? Well, we can make it expensive to own a car. Like, really expensive. Forget the COEs, the ERPs. Simply increase road tax to $10k a year just for the privilege of owning a car. Or an even higher sum, if necessary. The prohibitive cost alone will be certain to deter many from driving.

But lest this be thought an easy solution, there is one fundamental challenge associated with trying to reduce the number of cars. That is, the public transport infrastructure must be able to provide effectively for both present commuters and additional commuters who will no longer have access to private means of transport. Can the public transport infrastructure do this? Unfortunately, it appears that at present, the public transport system is already stretched beyond its limit, but that’s a whole story in itself for another day.


  1. I think there are 2 ways that will be more effective in controlling traffic (instead of the # of cars):
    1. making each ERP deduction high enough (say $10) for everyone to consider carefully about driving through it
    2. taking away the car park spaces in the CBD significantly, or making them prohibitively expensive like in Sydney or HK

  2. Yes, car ownership and traffic congestion are indeed complex problems for the govt. Road congestion has its negative externality - waste of time and money for drivers, pollution etc. Hence congestion has to be minimised.

    Yet current measures have only partially solved the congestion problem. There are probably a few reasons - S'poreans in general are getting richer, so a car is not beyond their reach; goods are transported by trucks and lorries, so a higher level of economic activity will reflect greater usage of roads by these vehicles; lastly, as always, more foreigners coming in here and buying cars.

    We also should bear in mind that though the govt has deliberate policies to raise the overall cost of purchasing cars, there is an impression that cars are generally more affordable, with occasional news of record low COEs, and intro of car models which seem cheaper.

    So how else can we reduce the number of cars? Well, we can make it expensive to own a car. Like, really expensive.

    This is a potential hot-potato. If you make it super-expensive to own a car, many S'poreans will complain, because their aspirations will have been dashed, squeezing the middle class even more. While it may work, the govt has to alienate tens of thousands of S'poreans in the process.

    Perhaps a better way is to modify the behaviour of drivers? I think the ERP scheme, no matter how much criticism it has attracted, has potential to be improved (:

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