BMWs at $213,000 Is Singapore Way to Push Trains: Southeast Asia

Jan 08, 2014 8:06 pm ET

Jan. 9 (Bloomberg) -- Singapore will stick to a licensing system that has made it one of the world’s most expensive places to buy a car, limiting vehicle ownership to encourage more people to use public transport.

Singapore needs the so-called certificate of entitlement for the “short and medium term” because of land limitations and road congestions, Lui Tuck Yew, minister of transport, said in an interview yesterday. More than 20,000 vehicles were sold in the city-state between January and November 2013, with luxury automakers Daimler AG and Bayerische Motoren Werke AG emerging as the top two sellers, making up one in every three cars sold.

The island state, smaller in size than New York City, is spending S$60 billion ($47 billion) in the next decade to double its metro rail network and make public transport attractive in a nation where a BMW 328i sedan costs S$270,800, six times its price in the U.S. Rising wealth has led to more car sales and traffic jams while the influx of foreign labor has overcrowded trains, prompting an overhaul of the transport system.

“We’ve had to take some measures here in Singapore that are both unorthodox and somewhat controversial and expensive,” Lui said in a Bloomberg Television interview with Haslinda Amin. “But we also at the same time are making sure that we try to provide alternatives and options for Singaporeans, so therefore massively increasing the public transport network so that there will be viable alternatives for people who decide that they no longer want to make use of cars.”

More Train-Riders

The government is targeting 70 percent of the population, currently 5.4 million, to use public transportation by the end of the decade, compared with 63 percent now, said the 52-year- old Lui, who graduated in chemistry from the Trinity College, University of Cambridge. The government plans to double the rail network across the city to 360 kilometers (225 miles) by 2030, he said.

The government will extend its rail network further after 2030, Lui said, declining to give details of the plan.

More trains and buses will also be added as part of a transport revamp in Singapore, home to Southeast Asia’s third- largest airport and the world’s second-busiest container port. Singapore’s population has jumped by more than 1.1 million since mid-2004 and the government has said it plans to raise the total to 6.9 million by 2030.

Singapore’s income inequality as measured by the Gini coefficient widened to 0.488 in 2012 from 0.482 in 2011, the statistics department said in a report last year. The gauge of income inequality ranges from 0, for perfect equality, to 1, which implies one person holds all of a nation’s wealth.

Purchasing Power

Car buyers in Singapore must pay for excise and registration duties that more than double the vehicle’s market value. They must also bid for a limited number of permits that are auctioned by the government, allowing drivers to own a car for a maximum of 10 years. Once the certificate expires, owners either have to bid for a new 10-year permit, export the car, or scrap it.

Singapore also introduced the electronic road pricing (ERP) in 1998 that charges toll for usage of the most-crowded roads.

In February 2013, the government estimated revenue from motor vehicle taxes for the year at S$1.55 billion, or 2.8 percent of the government’s total revenue, according to the Ministry of Finance’s website. Vehicle-quota premiums were estimated at S$2.4 billion, or 4.4 percent of the total.

Mercedes sold 3,506 cars in the 11 months to November and BMW 3,295, according to the Land Transport Authority’s website.

Land Wastage

“That attests to both the success and the purchasing power of Singaporeans,” Lui said. “Therefore, if we do not impose some constraints on the growth of private vehicles here in Singapore, then I’m sure that many more people will want to own a car.”

About 12 percent of land in Singapore is for roads, Lui said. That’s almost similar to the amount that goes into housing.

“There’s so much wastage if you have your vehicles and your people and your goods stuck in traffic,” Lui said. “It is the commitment by the government to really put in a lot more emphasis to shift people away from private transportation to a very high quality public transportation network.”

The taxi fleet in Singapore -- at 28,000, larger than New York and Hong Kong -- needs to “work harder,” Lui said. Many of the taxis today are driven by a single driver and therefore not utilized around the clock, the minister said.

“We’ve been encouraging the operators for example to find relief drivers to supplement the primary hirer,” he said.

A former information minister, Lui was also the chief of navy, according to the Singapore government’s website. He was appointed transport minister in May 2011.

Singapore, which was rated as the easiest place in the world to do business for seven years by the World Bank, needs to keep the levies high as part of its overall transport plan, Michael Wan, a city-based economist at Credit Suisse Group AG, said in a phone interview.

“The COE is still workable, it’s still effective,” Wan said. “The train system is at its maximum capacity now.”

--With assistance from Anand Menon in Singapore. Editors: Anand Krishnamoorthy, Linus Chua