SELECT COMMITTEE REPORT ON LAND TRANSPORTATION POLICY (Motion)

Dr Hong Hai (Bedok GRC): Mr Speaker, Sir, I beg to move the motion* standing in my name.

*The motion, also standing in the name of Dr Augustine H.H. Tan, reads as follows:

That this House adopts the report of the Select Committee on Land Transportation Policy and urges the government to give the committee's recommendations serious consideration.

The Motion asks this House to adopt the Report of the Select Committee on Land Transportation Policy. It also urges the Government to give the recommendations of the Report serious consideration.

Sir, Members of the Select Committee welcome the views and comments of Members of this House which I am sure will improve upon the recommendations. In moving this motion, therefore, I would like to ask the Government to give equally serious consideration to the views expressed by MPs in this debate.

Sir, one of the main recommendations of our Report is that car ownership should continue to rise with the expanding population and with higher aspirations for car ownership. Road infrastructure should be expanded and there could be more intensive use of land for roads, for example, by means of double-deck highways and underpasses. In brief, Sir, we understand and we sympathise with the wish of the man-in-the-street for car ownership and we advocate that such desires be accommodated as far as possible within the limitations of realistic land use allocation.

In line with this view, we advocate more extensive application of usage restraint measures, like electronic road pricing and higher parking charges in the city and other congested zones. Such usage restraint measures will persuade some people to leave their cars behind and use public transportation to go to work, and therefore allow the nation to sustain a higher level of car ownership.

The German Tribune recently reported that in Munich and Hamburg, where the car ownership rate is close to 100%, more than 80% of the population use public transportation to commute to work. We hope that in Singapore usage restraint measures will enable us to attain and exceed such levels of usage of public transportation and thereby allow us to afford a higher level of car ownership.

Sir, having said all this, the Committee is convinced that usage measures alone cannot solve the problem. At the end of the day, there cannot be unlimited growth in car ownership, otherwise the roads will be congested even in the evenings and the weekends. Ownership restraint must therefore continue to be the primary instrument for keeping traffic smooth on our roads. Usage restraints play an important but a complementary role.

If we can agree that there must be ownership controls, the criterion surely must be that the level of ownership be consistent with the capacity of our roads to cope with the car population. In other words, car ownership levels must grow only at the rate at which the road infrastructure can accommodate the traffic.

If we can agree with this, it follows that Government policy must seek to achieve a target rate of growth in the car population. The target rate can change slightly from year to year depending on whether new or better roads are being built and whether or not more people are using public transportation to commute to work. If it is reasonable for us to aim for a target rate of growth in the car population, the question remains: which is the best way to achieve this target?

Sir, the Select Committee considered this question at length and in some depth. We came to the conclusion that the price mechanism is the best way to achieve policy targets for car population growth.

But there are at least two ways to use the price mechanism. One way is to have the Government set prices by adjusting taxes periodically, ie, increasing road taxes or the ARF rate so as to dampen demand whenever the ownership rate is too high. This has been the method used in recent years. For want of a better term, we have called it the "pricing system" in our Report.

To avoid increasing taxes too often, Government often over-compensates by hitting harder than necessary, then wait for the demand to creep up to the target level. The result of Government price-setting is that we see sharp changes in consumer buying patterns at around the time of tax increases. There is often panic buying as people rush to beat a possible tax increase. This happened last year and contributed to the high growth of over 9%.

Sir, Government price-setting therefore leads to erratic demand, with sharp changes associated with tax increases. The Government seldom achieves exactly the target growth it seeks because it is impossible to predict accurately the tax increase necessary to achieve it. In other words, Government price-setting can get both price and quantity wrong, and it sometimes has.

What is the alternative? Here, I come to the second way of using the price mechanism. This is to set the quantity for each year and allow the market to set the price. This, in essence, is the quota system. With the quota system, the advantage is that we achieve every year exactly the target growth rate that policy makers judge is commensurate with our road capacity. We get both quantity and price right. The quota system is therefore nothing more and nothing less than a variant of the pricing system. The difference is that it achieves targets accurately without the sharp traumatic movements under the Government pricing system.

With a quota system, the car population grows steadily at the target rate, and consumers will find it easier to plan their expenditures as costs will be more predictable. Existing owners will be relieved of facing periodic sharp increases in road tax. Aspiring buyers will not see sudden increases in ARF that may throw them off their budgets for car purchases. In other words, both existing and would-be car buyers will find it easier to manage under a quota system.

Sir, there are many ways by which the quota can be allocated. The Select Committee has suggested the bidding method. We acknowledge that there may be alternative and possibly better ways to do it, and we would urge Members of this House to contribute their ideas to the Government for consideration.

The Select Committee proposes that the quota system should work in the following way. Each year, the Government announces a target figure for additional cars on the road. It then releases licences periodically, perhaps once every month. For example, if the quota was set at 12,000 additional cars for 1990, there could be 1,000 licences released every month. Sir, at this stage, with your permission, I would like to distribute a chart (Cols. 1023 - 1024) to illustrate my example. [Copies of chart distributed to hon. Members.] chart - PURCHASE OF NEW CARS UNDER A PROPOSED QUOTA SYSTEM (Cols. 1023 - 1024)

If I may refer Members to the chart. As I said, supposing the quota was set at 12,000 additional cars in 1990. To buy a new car, a person could either bid for a licence or he could buy a car by scrapping a used car. If he uses a licence for which he has bid, he would pay the ARF. If he buys a scrap car, he would pay the PARF.

The total number of new cars on the road for the year will be equal to the number of licences that are released plus the number of cars that are scrapped. In my example, if there were 12,000 new cars purchased with the quota, and we add to that number the number of cars scrapped, which might be, say, 18,000, then we get a total of 30,000 new cars on the road. This works out to be about 12% of the total car population which Members will note is much higher than the quota of 12,000 or 4.8%. These figures are summarised at the bottom of the chart that I have distributed.

Sir, the quota system will not necessarily raise prices compared to the present system. To ensure that this will be so, the ARF rate could be lowered at the time of the introduction of the quota system. This means that the sum of the lower ARF plus the bid price for a licence, could be higher or lower than the old ARF. To illustrate this, may I take a hypothetical example. The ARF rate today is 175%. Supposing it is lowered to 150%. If the bid price for a licence amounts to 30%, then the total amount paid to the Government will be 180% which is a bit higher than the present 175%. But if the bid price is only 20%, then the total amount paid would be 170%, or less than the old price. Hence, the quota system can raise or lower prices compared to the old Government price-fixing system. It would depend on the demand for new cars at any particular time.

Sir, there is a more practical question. Do car prices have to rise to slow down current demand? This is best left to the judgment of the Minister for Communications and Information. The point, however, is that if it is necessary for prices to rise to moderate demand, it will do so under either system. Either the Government will raise the ARF under the present pricing system or they will rise under market forces within a quota system. But there is no particular reason for the price to rise under the quota system any more than it would under the present pricing system.

As the proposed quota system has attracted some public interest, I would like to request the patience of the House to address some of the questions that have been raised in the press and in public discussions on this proposal.

The first question: Does the quota system give an undue advantage to existing car owners? The answer is that as long as we have the PARF system in place, existing car owners have an advantage as they can buy cars at concessionary rates. But I must emphasize that it is PARF, not the quota system, that gives existing owners an advantage. Under the existing Government price-fixing system, PARF already confers an advantage on existing owners. It would continue to do so under a quota system.

Indeed, if we scrap PARF, our proposed quota system will require all buyers of new cars to bid for licences on an equal footing. But do we want to scrap PARF? Those who object to existing owners having an advantage should ask for the elimination of PARF, not the elimination of quotas.

Sir, the second question that has been asked in public is: Will the quota system squeeze out aspiring middle-income earners from the car market? I think this fear is quite unfounded. The population of Singapore is growing at less than 2% per annum. The car population has been growing at over 5% in the last 13 years. This can only mean that an increasing proportion of Singaporeans are able to own cars. Under a quota system, this will not change as long as the annual quota is more than 2% - and I would think that the Government would set it at well above 2% - an increasing proportion of Singaporeans will own cars. This means that middle-class aspirations for car ownership will not be stifled. It is simply not true that only the rich will be able to own cars.

Another question that has arisen is: Will auction bidding cause the rich to outbid the poor? We do not have in mind an auction in which someone stands on a rostrum with a hammer and bidding gets higher and higher so that only the rich will have the staying power. In practice, it is likely that car dealers will submit sealed bids and will only submit as many bids each month as the number of cars they expect to sell. If they do not get enough licences, they could buy them from those who secured too many. Or they could get scrap cars instead for their buyers. Most prospective car buyers would get their licences through their dealers who pass on the costs to their customers. No prospective buyer need to be personally taking part in the bidding, although he is free to do so. The rich would not necessarily outbid the poor.

Sir, the question arises: for each bidding exercise, does every successful bidder pay the price he bids, or should he pay the price of the lowest successful bid? For example, if the highest bid is $5,000 and the lowest successful bid is $3,000, should one be charged $5,000 and the other $3,000? This is something that the Government will have to decide as to which system of bidding to use. My personal view is that everyone should be charged a uniform price equal to the lowest successful bid. This would benefit car buyers and it would prevent the Government from exacting excessive revenues from the exercise.

Finally, Sir, the question has been asked: will speculators and dealers "corner the market" and charge high prices to consumers? The Committee believes that there will be some speculation but it will not be serious. The reason is that we have a competitive market in cars and those who try to reap speculative profits can suffer losses as a result. The Government can discourage speculation by requiring all successful bidders to make their purchases within a short time of one or two months.

In summary, Sir, the quota system is really one way of using the price mechanism to achieve reasonable growth targets. These targets can be met more accurately with a quota system, and price movements will be less violent than under the present tax-based pricing system. People will continue to buy cars the way they have done for the last 50 years - from the dealers who will offer them a price and take care of all the other details and formalities. And buying a car will be affordable to an increasing proportion of Singaporeans.

Sir, let me now turn to public transportation. The Committee has placed strong emphasis on improvements to the public transportation system to reduce the Singaporeans' dependence on cars. This is necessary as we must cater to the section of the population who do not wish to own cars or who prefer to spend their income on other goods of higher priority. It also provides a viable alternative to car usage and therefore helps to maintain smooth traffic on our roads even as car ownership levels rise.

On the question of PARF, the Select Committee has recommended the retention of PARF. This would be fair to existing owners who previously made their purchase decisions on the presumption that their cars would have a certain residual value at the end of 10 years. Retention of PARF would also help keep the average vehicle on Singapore roads young and in good condition.

Sir, I would like to conclude by reiterating that the Select Committee has kept at the forefront the interests of Singapore motorists, aspiring car owners and the man in the street who needs a good transportation system to get to work and play. If measures to retain car ownership and usage seem at times a little rigorous, it is only because we need to pay a price for enjoying smooth traffic and a pleasant travelling environment.

I commend the report to Members of the House for their views and suggestions, and urge the Government to consider our recommendations and those of Members of the this House.

Sir, I beg to move.

Question proposed. 2.05 pm

Mr Lim Boon Heng (Kebun Baru): Mr Speaker, Sir, I rise to support the motion.

I am privileged to have had the opportunity to serve on the Committee to review and consider some of our land transportation policies. Let me say that I have benefited in the process. I now appreciate more fully how difficult the job of Government is, with respect to land transportation policy.

It is easy to put forward suggestions. It is quite different when one has to think through the likely consequences of one policy against the consequences of another policy.

I believe the discussions that we have had, and are now having, will also help the public to appreciate the difficult job the Minister for Communications and Information has.

It has been suggested that people are rational and will accept rational policies. To this, I have a qualification. People are rational and will make rational choices for themselves. But what is rational to the individual is not necessarily rational for the country. To the individual, to own a car is a rational choice. Not only does it improve his image, but it is also the most efficient means of transportation for him. Needless to say, if everyone exercises his option to buy and use a car, there will be increased congestion. This is not rational from the national viewpoint. But can we reasonably expect each individual to ponder the national interests before making this choice?

Thus, when there is a conflict between individual aspirations and national interests, the Government has the unpleasant task of regulating and putting in place disincentives. We are therefore left with the problem of how to make disincentives more acceptable to the people, and yet effective. We cannot hope to make disincentives popular. Then, we also have to bear in mind that for every measure introduced, there will be a number of measures thought up to beat the system.

In considering ownership measures, the Committee noted that the present system of pricing is not wholly effective. The Committee agrees that the quota system is more effective in controlling the rate of increase of the car population because it can fix the rate of increase. It considered this in general, and had not gone into the details of the implementation at great length. For example, will there be quotas for different engine sizes? This may not be necessary. The variation in car prices between the upper end high capacity engine cars and the 800 cc cars is very large. It is far larger than in the United States. Although there is a smaller variation in prices in the United States between the upper and lower end engine capacity cars, there is still a market for each type of car. Therefore, a quota system, when it finds its balance, is likely to result in a narrowing of the range of car prices. The consumer will still exercise his choice based upon his affordability.

The other factor not fully discussed is how commercial vehicles and Q-plate cars should be treated. In general, all vehicles should come under the same net, because all vehicles used on the roads contribute to congestion. This would have consequences on the cost of doing business. So some preferential treatment ought to be given if we are not to push or distort the cost of doing business unduly. But which is the best way? This has to be debated.

One way is for the Government to grant a tax discount. But even this may allow circumvention by people who want to own a car and use a commercial or Q-plate car as an indirect route of owning one. So it has to be studied in greater depth by all of us and by the Ministry of Communications and Information, in particular.

One of the other existing policy measures which the Committee considered was PARF. It is a measure introduced to make it attractive for car owners to remove old cars from the roads, so that there will be fewer breakdowns that would add to traffic congestion.

In the past year, there was a view put forward that the PARF has turned the car into an investment. The Committee sought views. It became clear in the work of the Committee that the cause of rising second-hand car prices was not PARF itself, but the sharp appreciation of the Yen and the Deutschemark.

To abolish PARF on this count would be wrong. In fact, abolishing the PARF scheme would lead to more old cars on the roads, adding to the car population, and what is more, with more old cars there will be higher incidence of breakdowns and ensuing traffic jams. Between 1976 and 1988, about 148,000 new cars were bought using the PARF scheme, an average of 11,340 a year. On average over this period, we are disposing of 11,340 old cars every year. So it is a useful scheme.

The Committee therefore concluded that PARF should be retained. It added a refinement, and that is, to introduce a sliding scale to create an incentive for car owners to refurbish and export older cars. The quality of our cars on our roads would therefore be higher with less risks of breakdowns. Whether there is in fact a large market for refurbished cars or not remains to be seen. But we noted, however, that the export of cars, either refurbished or not, already exists.

Mr Speaker, Sir, I believe we have opened up even more questions after the work of the Committee and I hope that we will see active participation by the other Members of this House on this motion.

Mr Loh Meng See: Mr Speaker, Sir, at the outset, I think it is very important for Singaporeans and the motoring public to realise and understand that with today's rate of growth in the number of cars on the road, the prices and the costs of maintaining their cars will inevitably have to go up.

The Government would under the present system resort to the use of fiscal measures like increases in car registration fees and road taxes to bring the number of additional vehicles down. This method has the disadvantage of hurting all motorists simultaneously when the problem is the addition of new cars on the road. This system of pricing and fiscal measures have given rise to the continuous tax increases over the years.

By comparison, the quota system is more effective in controlling the absolute number of cars on the road. It has the advantage of providing for smoother and orderly adjustments in car prices and in the long run, I believe, it is more predictable and stable. The question in everybody's mind is how to make the quota system more equitable, especially to aspiring car owners who have yet to own cars.

The manner of phasing in the new quota system has to be carefully worked out. One measure, however, has to be ironed out. I do not think that it is right and proper to give existing car owners the right of replacing their old cars with new ones in perpetuity. The existing car owners should be given notice that over a period of time they too would have to be treated like all other new car owners, though a smaller concession, but not to the extent that is currently applicable.

In adopting the quota system as the overall concept, consideration should be given to people with different degree of affordability and the choice to buy cars of different engine capacities. The quota system could be structured on a layered basis to reflect affordability and choice in terms of price ranges and engine capacities. The statistics on car population over the last few years should form the basis to work out the multi-tiered quota system.

With the tender premium paid under the quota system, the ARF system has to be adjusted. We do not want the prices of cars to be artificially inflated. We want high quality cars to remain an available choice to the motoring public. I wish to emphasise that our objective and focus must be to tackle the problem of transportation and not mix it up with the attempt to use this issue to redistribute income and wealth among the different income groups.

May I take this opportunity to ask the Government to review the rate of road taxes paid by motorists? As it is now applied, there is too great a difference, say, having to pay road taxes of a 1600 cc car as against that of a 1601 cc car. The owner of a 1600 cc car pays a road tax of $1,440 a year and that of a 1601 cc car $1,681.05, a difference of $241.05 for that additional one cc. A step up approach would be more equitable.

May I now come to the public transport system? For places being served by the MRT, we should encourage as many motorists as possible to travel by the MRT. More car parks ought to be provided near the MRT stations in the outlying districts. Amenities like covered-walkways and bridges making MRT stations accessible and convenient for commuters will attract the motoring public to travel by the MRT. Good feeder services by bus to and from MRT stations at reasonable cost will help reduce the need to travel by cars.

The Government can give incentives to companies which organise private bus transport for their staff to and from work. This will reduce the need for employees to drive their own cars to work. One major reason as to why people own cars is that they need the car to commute between their homes and places of work. Private buses should also be exempted from the ALS.

Finally, Sir, the issue of evening ALS. I welcome the recommendation of the Select Committee to shorten the evening ALS by half-an-hour, from 7.00 pm to 6.30 pm. Many residents, students, and those doing business in the restricted zone have been adversely affected. I hope the Government would implement the revised operating hours for the evening ALS immediately.

Sir, with those observations, I support the Motion.

Mr Chin Harn Tong (Aljunied GRC): ( In Mandarin): Mr Speaker, Sir, the Report of the Select Committee on Land Transportation Policy since its announcement has aroused a lot of talks and discussions among people of various circles. Car dealers, managers, executive personnel, teachers, workers, hawkers and even housewives have been talking about the relevant questions, particularly about the quota system. From this we can see that it is having great effect on the livelihood of our people. Therefore more is the reason we should deal with this matter carefully and cautiously.

More so as from the newspaper reports, we learn that many people are rushing to buy new cars, are available for delivery to them. I am the more worried about this kind of behaviour leading to speculation and to some people attempting to make quick money from this kind of situation.

Sir, clothing, feeding, housing and transportation are the four major needs of human life. Singapore's economy is generally progressing favourably. The living standard of our people is also rising. It is very common for people to go by car instead of on foot. Cars are a very important means of transportation when people go to work. But, on the other hand, our land space is limited and usable roads are also limited. We are also concerned that if we do not limit the rapidly increasing number of cars on our roads, maybe one day Singapore will become like Bangkok, Tokyo and London where traffic congestion will result in the paralysis of public transportation system. Therefore, the Government has set up a committee to study the relevant problems and seel a solution before the situation worsens. It is right and proper for the Government to do so.

Mr Speaker, Sir, I do not deny that the quota system is a very effective measure to curb the number of cars from increasing, but, it is just like what is described in the field of Chinese martial art as a drastic and deadly move of last resort. Usually the martial art master or kung-fu experts would wait until the very critical moment before he would unleash this fatal move as a last resort, because the move will not only cause a fatal hit to the opponent but also likely to wound those around. As it is a most deadly and fatal measure, it would not be resorted to unless very necessary. The quota system is also like this. Therefore I hope the Government will try other means of curbing the cars first and not try to hurriedly exercise this deadly measure until at the very critical stage as a necessary last resort.

Although the quota system may effectively curb the increasing number of cars and solve the problem on the roads, it will affect those who have to use cars for their work, and expecially the younger generation who may want to drive to work in the future.

I am worried as mentioned earlier that the system may enhance speculative activities. I would like to raise the question that before our land transportation has reached a critical and very serious stage, is it necessary for us to use this extreme measure of the last resort? Are there no other measures which can solve the relevant problems? For instance, can we stipulate that only taxpayers who must pay a certain level of tax before they can qualify to buy cars? In other words, we should use the taxpayers's tax paying record to decide whether he can afford to own a car? If the tax amount reflects adversely on his economic capability, there is no reason for him to possess a car. And, also, should we stipulate that everyone should possess only one car? In other words, if owning more than one car is to be considered a luxuty, then we should prohibit a person from owning more than one car.

Of course, the electronic road pricing system suggested by the MCI will be a positive and effective method. But more important is that we should change the habit of the public in relaion to the mode of transportation to serve as an alternative? Now that our MRT has come into operation, it is of course a very historic achievement. But many people do not find the MRT convenient to use because there are only two lines. Do our bus route services conveniently serve the residents in all areas? Can our network of roads, be improved further, such as by building more under-passes? Should we encourage people to make more use of bicycles? Should we than build more bicycle tracts and paths for the greater safety of our bicycle-riders?

Sir, the quota system is very effective and quick method to curb car growth. Once you announce that it has been enacted into law with immediate effect it will achieve instant result. But it affects the livelihood of the people to a very great extent. Therefore we should be very careful with this measure.

Other measures and ways of improving land transportation, even though may not achieve instant result, but if they are helpful and beneficial to the livelihood of our people, should be made use of first. What I mean is that before reaching the critical stage when it is very necessary for a quota system, we should seek and consider employing other effective means and measures to control the car population and try as much as possible to avoid using this measure of last resort. This then should be the best policy.

Mr Peh Chin Hua (Jalan Besar GRC): ( In Mandarin): Sir, I support most of the recommendations by the Select Committee on Land Transportation Policy. I welcome the suggestion that the PARF value should reduce in accordance with the increasing age of the cars. In other words, for future cars, the later a car is to be scrapped, its PARF rate will be the more reduced. So this will enable people to change any concept that a car is not a consumer goods but a luxury. I also agree to the quota system as mentioned, I agree to it also because car dealers and car buyers can freely exercise their demand when bidding on a free market which decide the price of the new cars. This will also avoid the dissatisfaction of people about Government's measures increasing road taxes and so on. However, I am rather perturbed about certain suggested concessions in the Report such as given to the present car owners to continue to have the advantage of replacing their old cars with new cars in addition to enjoying the PARF value on their existing cars. The suggestion in the Report allowing PARF value to continue with the existing cars is understandable. But, when bidding takes place under the quota system the same right of PARF for the existing car owners may not seem right and proper. Because the existing owners can still make use of the PARF for every 10 years to change cars even under the quota system, but those who do not own cars at the moment will have to bid, under the quota system, to buy new cars. So this quota system will appear to be unfair to those who are non-car owners or will give the people the impression that the Government is favouring the rich and the car-owners while ignoring the poorer-offs. It is unwise politically.

Therefore, when implementing this system we should also consider the feelings of those who do not own a car at the moment. Therefore, the PARF system and the concession given to the existing car owners to change their cars should be treated separately as two categories. While the PARF system is still in use if we allow the present car owners to change to new cars, we should have further consideration. We could consider allowing the present owners a certain limit of time, say, within 2-5 years, to change their old cars with new cars and not allow them unlimited time to change. When the time is up, they should like every body else tender for new cars before they can exchange their old cars. If we think it is too harsh to present car owners, then we could stipulate that these car owners should pay road tax in a different ratio according to the increasing age and usage of their cars, so that this will not cause any complaint of unfairness to future new car buyers who may feel that they have missed the early boat and are bitter.

I feel that for Government measures to be effective, the people who may or may not own a car or who may or may not be able to buy a car should be made to feel that all Government measures are fair to all. We should also think in terms of those who do not have cars at the moment. If those who do not have cars at the moment should find it necessary to have a car for their work they should be enabled to think that they will be fairly treated under the new system so that they will also have a chance to buy new cars.

I support most of the recommendations in the Report of the Committee.

Mr Heng Chiang Meng: Mr Speaker, Sir, I support the motion and I would like to commend the Chairman and his Select Committee on a job well done. Unfortunately, I have to disagree with the Report's main recommendation, i.e, the proposed quota system as a means to restrain the car population.

Sir, as I listened to the very persuasive arguments put up earlier by the Member for Bedok GRC, Dr Hong Hai, the Select Committee's Chairman, I must say that I was almost convinced by him that the quota system would be the saviour of Singapore's traffic problems. Luckily, Sir, I also remember reading much material on the fallibility of governments to interfere with the free market, especially quotas, which restricts supply. Eventually, for one reason or another, such interference throws up more problems than it solves. And I believe that if the quota system is accepted, we will probably come to the same messy end.

Sir, the Report tries to put across the proposition that the quota system is price-neutral, ie, it neither pushes up nor lowers prices, but that the price level will eventually depend on the demand vis-a-vis the number of new cars permitted. In theory, Sir, this is not wrong. But we all know that given the reality of the situation in Singapore, under this system, prices will increase. The argument that an economic slowdown will reduce prices under the quota system is not relevant because, in any case, under our current system without the quota, we already have seen this happening during the last economic recession in 1985/86. I remember the prices of used cars then dropping to very low levels but, more significantly, I also remember that the prices of new cars were effectively lower - through larger discounts, more free extras and cheaper or even interest-free financing offered by motor companies.

Therefore, I would put across that the economic argument of a free market mechanism for car pricing based on a fixed quantity to justify the quota system is a spurious argument. Because even under our present system, we do and we have also seen prices fluctuating as they did between 1985 and the present time.

Instead, Sir, what we may eventually get under a quota system would be a car market with a high degree of volatility in prices, speculative content, possible cornering by groups working as informal cartels and eventually an unhappy population. Experience has shown often enough that such systems normally work towards the disadvantage of the man-in-the-street.

However, Sir, this does not mean that I am advocating that we retain our current system if, by that, it means perpetually increasing the Additional Registration Fee (ARF) because I believe that this will ultimately just increase the price content of the car. On the contrary, I would like to urge the Government to reduce the price content of cars while adopting a more aggressive posture on measures to restrain usage.

Sir, I do not think we should restrain ownership. We should let the people own cars, if they want to and if they can afford to. Why should the Government tax this ability to own cars out of existence? After all, car ownership does not create traffic congestion. It is car usage which creates the congestion.

We all know that ultimately car usage will be best served or best restrained by a system of road pricing. But since the electronic road pricing system is still some way off, I would like, for the time being, to propose the concept of increasing "operating costs of car ownership" as a proxy. To put it in another way, until the ERP is available, I would like to advocate a policy based not on increasing the "price content of cars" but rather on increasing the "operating costs of cars".

Sir, as long as the demand for cars is more than what can be supplied, whatever the reasons for the restriction of supply, the economics of scarcity will prevail, ie, the price content of cars will go up, whether through a quota system or an increase in ARF. This means that for most purchasers, cars will be viewed as a partial investment. Hence, high prices are not really a deterrent because an owner can expect to recover the investment in the future. This, in general, has summed up the situation in the past where increasing prices do not really deter ownership.

However, Sir, if a potential owner realises that the high cost of owning a car is through "high operating costs" which once expended will not be recovered, then perhaps the marginal owners will think twice before embarking on ownership. Some measures of such "high operating costs" policy could be higher road taxes, higher ALS fees, higher petrol duty and much higher city parking fees. Here, I must stress that these measures should be used to encourage Singaporeans to rely more on public transport rather than on private cars. Hence, such measures should not apply to public transport. If they do, they would not be effective as the cost differential would not be great enough to encourage switching from private cars to public transport.

There is, however, one more important factor in my proposal and that is the system of increased operating costs translates into extra revenue for the Government. On the other hand, increased price content, whether through increased ARF or quotas, translates into windfall gains for existing car owners.

Normally, this would not be too bad. After all, enabling our people to be richer is not really a bad thing. However, we must remember that car owners are still a minority in Singapore. Should we therefore tolerate a land transportation policy which enriches the minority who are, in general, already the richer segment of the population? What of the majority of Singaporeans who are not car owners? Who speaks for them? Though seemingly uninvolved, Sir, I believe they pay a very high price to enable car owners to enjoy a higher quality of life in land scarce Singapore. Some of the high price paid are noise pollution, especially for those living near roads, breathing in air contaminated by leaded exhaust fumes produced by cars, and loss of public land which could be used for everybody's enjoyment, such as parks, because such lands are used instead for roads and car parks.

At least, Sir, with the higher revenue for the Government, the majority non-car owners can have some benefits in return through better housing, education, medical services and a host of other public services provided by the Government at a subsidised cost. Moreover, let us also not forget that the lowering of income tax rates all these years is only possible through increases in indirect revenue, such as those from car ownership.

Sir, as for the other recommendations, it is clear that I do not agree with any easing of the ALS hours, even those in the evening. I support the rest and would like to comment on two of them. One is on city parking. City parking charges should be drastically increased and perhaps one way to encourage this would be to allow, without extra cost or at low cost, owners of office blocks to convert some car parks into offices. After all, it would also help to alleviate the office space shortage presently being experienced in the city.

Second, on public transport. I fully support the concept of looking at various modes of land transportation system as complementary and not competitive. In particular, I fully support the suggestions on how to divert more commuters to the MRT. In addition to this, I would also like to renew my earlier appeal for a reconsideration of building car parks, wherever possible, next to MRT stations.

Mr Chng Hee Kok (Tiong Bahru GRC): Mr Speaker, Sir, I shall confine my remarks to the most controversial recommendation in the Select Committee's Report, ie, the recommendation to impose a quota system on car ownership.

Sir, I will be stating the obvious if I say that car ownership is a very sensitive and passionate subject. Each time this issue is raised, there is a sudden increase in the number of new cars. I understand that since the release of the Select Committee's Report, new cars are being registered at the rate of 250 a day. This is more than 6,000 cars in one month. Last year, a similar debate also resulted in such a significant increase. This indicates nothing less than a strong desire to own a car before the Government implements additional curbs and restrictions. Any hint of control gets people into a frenzy into the car dealers' showroom. Owning a car, which says a great deal about who you are, is a passion which may not be easily doused. Ask any young Singaporean. After, or even before he owns an HDB flat, the ownership of a car is a very high priority. Such an aspiration can only be curbed at great political cost. It is also a great potential loss to the country in the form of a strong rationalisation for emigration. A number of people have emigrated because they say they cannot own cars.

The recommendation for a quota system seems to run counter to the Government's stated emphasis on measures to curb usage. I favour control on usage. Control on usage has its great advantage of being equitable. It falls under the principle of equal misery. All car owners and potential entrants are equally affected. But not so for a quota system. It will be naive to argue that a quota system will not be an effective tool to control the number of cars. It will be equally naive to argue that a quota system can be made equitable. It cannot be equitable and therefore places those without cars at a disadvantage.

There is an argument put forward by the Chairman of the Select Committee that new entrants into the car market is presently equally disadvantaged. This is not so. In the present system, they are not disadvantaged in relation to the present car owners, because the vast majority of cars are owned after the implementation of the PARF scheme. Therefore, almost all car owners are at one time or another first-time car owners.

Since the quota system is by definition a restriction, hence demand must be greater than supply, this must inevitably lead to a sudden steep increase in car prices, despite what the Chairman has said. It will lead to higher residual prices and it is this high residual value which makes a car a bankable asset and a worth-while investment. A quota system can only accentuate this. It will only make it worse. Moreover, a quota system is fraught with all possibilities of speculation and the possibility of someone cornering the market cannot be dismissed. It is a real possibility.

I am disappointed with the work of the Select Committee. The Select Committee should have focused more on the alleviation of congestion rather than car ownership. Alleviation of congestion means a detailed look at car usage control measures, the possibilities of an electronic pricing system, the use of roads on even or odd days, and even more expensive parking charges at congested areas instead of a two-tier flat rate system. This is in addition to a plethora of other possibilities.

The Select Committee should have made strong recommendations to extend the MRT network even to population and other centres which may now not appear to be economically viable. For example, a line should now be built to Changi Airport even though it is not likely to be viable. If you take into account the number of tourists that will be coming, and the number of people living in the East Coast area, it makes sense now to plan for such a line. Therefore, some cross-subsidy is inevitable and necessary if we wish to encourage more effective and wider usage.

The Select Committee should have recommended a dramatic improvement in the quality of the bus service through special capital allowances or tax breaks to air-condition and upgrade all present buses. Furthermore, some of the money collected from car owners should be used to subsidise more feeder services to public and private estates after the bus service has been upgraded. This may be done again through the tax system. With a comfortable and convenient bus service, travelling on public transport will not be a tedium.

The Select Committee should have taken a more detailed look at a full integration of the bus and MRT system, instead of treating them separately. Presently, Sir, because of competition between the organisations, the bus companies are not enthusiastic about feeding more passengers into the MRT system. When I respond to requests by residents for a bus service to serve the MRT system, the inevitable answer that comes back is no. I understand that because they are in competition, the bus companies are not quite prepared to feed more passengers into the MRT system for the long haul routes. By feeding more passengers into the long haul routes, It seems the bus compamoes will lose out. So if they can be integrated more fully, I think then the system can be better utilised. In fact, the Select Committee should recommend some form of cross equity ownership - MRT owning some equity in the bus companies and vice versa - so that this integration can be further promoted.

Alleviation of congestion must also mean that no further land should be released for tender by URA in areas which are already perceived to be congested. In fact, the Select Committee should have envisioned and encouraged the setting up of alternative large scale business centres complete with full infrastructure.

Control of traffic congestion must be a total approach. It calls for good land planning, a quantum improvement and integration of the public transport system and stiff measures on car usage. I am afraid I can only give the Select Committee a very low score for missing out on an otherwise golden opportunity to imprint a comprehensive solution. It instead opted for small measures to solve what may be a short-term aberration.

After all is said and done, Sir, I humbly submit that we have all missed out an all-important point in the entire debate. I refer to this insatiable and incorrigible desire by Singaporeans to own a car, come what may, whatever the cost.

Perhaps, the Select Committee and the Government should, in addition to considering all other measures to curb car ownership and usage, direct their attention to Singaporeans' value system and find out why car ownership remains at such a premium. Why do Singaporeans continue, despite our good and vastly improved public transportation system and the prohibitive cost of car ownership, to aspire to car ownership?

The reasons, of course, are historical and an unavoidable part of our improved economic conditions and greater affluence. But why is car ownership still so important despite the overwhelming costs and reasons against it?

Think of countries like Britain. A car does not cost as much as in Singapore, yet many middle income Britishers do not own cars nor crave for one. Many attired in bowler hats and high executive fashion still commute to work by train, travelling shoulder to shoulder with the lowest paid office boy. There is no shame attached to non-ownership of a car by most people, and few people drive to the office because it just does not make sense.

I suggest that as a long-term solution to this perennial and intractable problem of consistent increase in the car population, the Select Committee should have studied this aspect of the car ownership question. Perhaps, we should think of a new public education campaign - to change our people's value system and attitudes, and reduce the inordinate pride and status attached to car ownership. Why not a campaign to show travel by MRT and buses for what it really is - a smart alternative to driving to work? Or reduce the negative image of travelling on such public transportation. We can at least convince our people - through a massive PR campaign - to show that you are not a failure because you did not own a car, or to show that you were smart enough to give up your car to opt for something far more sensible.

Sir, I support the motion in so far as adopting the Report. But I would urge the Government to go slow, real slow, on the recommendation to impose a quota.

Dr Lee Siew-Choh: First, let me say that I am somewhat surprised that the House has been asked to adopt this Report of the Select Committee so very quickly, soon after it has been made public. Many people have discussed the recommendations but there are also many more people who have not yet studied this voluminous Report.

A few days ago, our Minister for Trade and Industry said that the Ministry of Communications and Information would study the recommendations and follow up in a few months. Now the few months would appear to have telescoped into a few days. Probably the Minister also has a hand in and oversees the Ministry of Communications!

I am just wondering, Sir, if the Ministry has really studied the recommendations and has already come up with a decision just in a few days. It creates the impression that all this is merely a part of the usual shadow-boxing between Frontbenchers and Backbenchers of the PAP Government. And does the Government really wish the people to be given some time to study the Report well?

I also find the words, "adopt" and "serious consideration" a bit confusing. If the Government adopts the Report, then my understanding is that the Government accepts the Report. If it accepts the Report, then it may be assumed also that the Government has already seriously considered it. Probably Dr Hong Hai could explain all this.

Now, let me come to the Report itself. I wish to say, at the outset, that I support most of the recommendations in the Report in principle. But there are important omissions in the Report. Moreover, some of the arguments in the Report are based more on assumptions than on the actual survey of the traffic situation or the various factors that lead to traffic congestion in Singapore today. For instance, how much of the traffic congestion is due to car accidents, car breakdowns, road construction, road repairs, inconsiderate parking, and so on? If traffic flow is smooth and unobstructed, assisted by green waves of automatic traffic lights, will more cars on the road necessarily cause traffic congestion? This has not been answered. Do more cars going into the CBD mean that the same number of cars are on the road all the time? And how many of the cars going into the CBD are parked in parking lots and are not on the road again until the evening hours when the car owners leave office for home? "If somebody goes out, drives the car on the road and causes one minute of congestion on the road", I quote from the Straits Times, (presumably because of a car accident or breakdown on a narrow road), the cost to him, according to Dr Hong Hai, is one minute of his time. But I must ask: does this necessarily follow that there are half a million commuters on the same narrow road trailing behind somebody's car at the time?

Although I agree, in general, that more cars on the road may cause more congestion, how does the ALS relieve road congestion as a whole in Singapore? Is it not a fact that the ALS could only relieve congestion in the CBD at the expense of the non-CBD areas, and transfer the congestion which might have been there - not necessarily true - in the CBD onto the fringe roads? Therefore, a proper investigation and survey should first be carried out. Only then can appropriate measures be implemented for our land transport policy in Singapore. Unfortunately, such an investigation and survey has not been carried out by the Government.

I agree with Mr Heng that car ownership does not cause congestion on the roads, nor car usage. We must not forget that though Government Ministers often tell us that certain policies are pursued to ease traffic congestion on the roads, nevertheless, such policies have in fact been implemented with the main aim of increasing Government revenue. Millions and billions of dollars of taxes have been imposed on car owners through road taxes and the additional registration fees. Today, cars in Singapore are the most expensive in the world. And we may also ask, how has traffic congestion come about in Singapore? First, it must be said that traffic congestion is generally a product of the free enterprise system. As production increases and the income of workers also increases somewhat, and the general standard of living improves, more and more cars will appear on the road, especially if more and more cars are being imported.

But in Singapore, Sir, road congestion has been compounded by Government so-called urban renewal and the disruptive evictions and resettlements of large sections of our population from the city. People have been driven from the city and their usual places of work to outlying satellite towns and from one district to another. All this has created the need for the people to have more and more cars to travel long distances, from their new homes to their old work-places, or to Jurong and other industrial estates. Therefore, traffic congestion in Singapore is in fact a problem very much created by the PAP Government itself. It is a problem not simply of so-called affluence, frequently stressed by the PAP Government. It is a problem which has caused our people great economic losses as well as hundreds of injuries and deaths year after year.

All this has not been given any mention in the Select Committee's Report. Though I agree that the recommendations of the Select Committee be accepted in principle, as I have said, by Government as a whole, nevertheless the Workers' Party has reservations as follows.

The proposed ERP is a measure that is unfair and inequitable. It penalises those who have to use their cars over long distances to go about their business or their work. With the ERP, the more they use the car the more they have to pay in taxes, although they have already paid their share of car taxes and road taxes. This could mean, Sir, difficulties for many people who can hardly balance their monthly budgets. Those who are well-off of course will not feel the pinch. If Government insists on having the ERP, will road taxes and the ARF then be reduced? Could the Government Ministers give us an answer? Therefore, the proposed ERP should not be implemented. It should certainly not go hand in hand with any quota system, as suggested by Dr Hong Hai.

On the quota system, the Report states:

'The rate of increase in the car population can be effectively controlled by means of a quota system'.

I agree fully with that. But the bidding for a licence to buy a car will put the less well-off at a big disadvantage, as has already been stressed by many people before me. Those who can afford and are better off will be able to out-bid others and be at an advantage, just as in the bidding for HDB shops. It will certainly increase the price of cars somewhat and therefore it is very unfair to those who are not so well-off. To be fair, the quota allocation should be based not on bidding, but on the person's need for the use of car transport, and not on how much a person can afford.

The PAP Government seems to believe that money should decide on every policy it pursues. Those who are in the essential Government service, Sir, and those who need a car for their businesses should be allocated permits to buy cars. Whether or not a person has a car presently should not affect the allocation of the permit. The present non-owner will not be "squeezed out", to use the words of Dr Hong Hai, to have a car later on. Those who own cars today will not qualify for a permit to buy a second car. The disadvantage faced by the first-time owners inherent in the present pricing system, to quote from the Report, will thus be considerably minimised. Existing car owners may use their cars for any period up to the limit of the present PARF 10-year period, and scrap the car after that or sell it for re-export before they can qualify for a permit to buy a new car. This means, Sir, that each person is entitled to only one car at any time.

What is an essential service? A Government special study must be carried out to find out how many people need the car for their business, how many people merely use the car to go to the office and leave the car parked until the time to go home, whether we need to restrict car usage to certain groups of people, to certain hours of the day and so on. A special committee will have to list the points for qualification as an essential service. The public will have to be consulted and should help on this before the Committee decides accordingly. Government has the resources to help bring this about if it wanted to do so.

The ARF should be greatly reduced. Government has repeatedly said that the ARF is intended to limit car population growth. But it has been clearly and repeatedly shown that the ARF does not limit car growth. Therefore, if the Government should be honest with itself and with the people, it should scrap the ARF completely. Will the Government do that? Will it be honest with itself?

The PARF, however, should be retained for all existing vehicles for a total period of 10 years. The PARF may vary with the age at which the car is disposed off as recommended by the Select Committee. But if it is only an option, as quoted from the Straits Times, then car owners who exercise the option to scrap cars from the fifth year should not be allocated a permit to buy a new car, unless the present car is proven to be not road worthy. Scrapping cars from the fifth year is a great waste of funds. Only the car companies benefit. Cars are made to last more than 10 years and the PARF should in fact be extended to 15 years. This has been suggested by many trade associations in the transport business over the last 10 years. In addition to two-yearly inspections, Government has also imposed a smoke emission limit for cars. So there should be no fear of pollution from older cars.

Keeping the PARF would cut down foreign exchange loss through the unnecessary purchase of expensive new cars. It would also greatly help our Singapore spare-part dealers and other services connected with car repairs.

The evening ALS has caused great inconvenience to many people. It should be scrapped, not just the shortening of hours. Entry of cars into the CBD does not necessarily cause congestion on the roads. Cars entering the CBD could be parked away in car parks. Cars already parked since morning will leave the CBD for home from 4.30 pm onwards. So there is no real congestion in the CBD if traffic flow is smooth and unobstructed. The morning ALS should also be scrapped. But as the charge is now lowered to only $3 per entry, perhaps it could be retained for a little while.

Recent increases in parking fees in the HDB estates should also be scrapped. Parking in the HDB estates does not cause traffic congestion on the road anywhere. Clearly this is another revenue collecting measure despite all the talk about the cost of land and so on.

Finally, Sir, I fully agree with the recommendations listed in the paragraphs on Public Transportation and Infrastructure. Public transport should be comfortable, convenient, cheap and pleasurable. There are great fears, however, that bus fares and MRT fares may soon go up. So let Government give us an assurance that the fares will not go up. All in all, Sir, I believe that the Select Committee has done a good job.

With the reservations I have mentioned, I give my full support to the Motion. Now it is up to Government to carry out some of the recommendations therein.

Mr Speaker: Order. I suspend the sitting and will take the Chair again at 3.30 pm.

Sitting accordingly suspended at 3.10pm until 3.30 pm. Sitting resumed at 3.30 pm