LAND TRANSPORT POLICY

[Mr Speaker in the Chair]

Mr Speaker: Order. Members may now proceed to put their questions to the Minister on his Statement.

Dr Hong Hai (Bedok GRC): Mr Speaker, Sir, I have three questions for the Minister concerning today's statement on the quota system. Before that, I would like your leave to spend one or two minutes covering the background to these questions.

Mr Speaker: That will not be permitted, Dr Hong Hai.

Dr Hong Hai: In which case, I shall proceed directly to the questions. I presume there is no quota on the number of questions I may ask!

Sir, in proposing the quota system, the Select Committee had opted to leave all implementation details to the Ministry. In order to give our proposals some concreteness, we did give a simple example which was to leave existing owners alone since they had previously bid an entry price and to let new owners tender for licences to purchase their cars. We did not say how long this would be for, and we did emphasise in our Report that this was only one way of approaching the problem. We also recognise that there would be windfall gains which the Government should minimise by adjusting PARF rates. Sir, I dare say that if the Select Committee were to meet again ---

Mr Speaker: Dr Hong Hai, could we have your question, please?

Dr Hong Hai: Yes, I am coming to it. Would the Minister not agree that if the Select Committee were to meet today, we would probably agree that the broad framework of implementation which the Minister has unveiled would probably be quite acceptable and agreeable to the Committee. The framework appears to be well thought out and comprehensive. However, the GPC would like some time to evaluate the details before giving further comments. My questions specifically are:

First, in starting the first year quota at 4.3% and reducing it to 2.5 - 3% in the second year, would this not create a rush to buy cars in the first year in order to beat the lower quota in the following year? If this were to happen, first year prices would be pushed up and the result would be paradoxical, ie, the year with the higher quota would also see higher vehicle prices. Would the Minister kindly comment on this possibility?

Second question, Sir. If at the end of the first year, we find that - thanks to the excellent traffic management of MCI and PWD - traffic flow is still at a fairly comfortable level, would the Minister be prepared to maintain the quota at around 4%? If, however, traffic congestion were to go up significantly, but was still not serious, would the Minister consider introducing more rigorous usage measures, such as higher city parking charges and higher CBD charges in order that the 4% quota may be maintained?

Sir, my third and final question is: the Minister has decided that all vehicle owners, new and old, will have to tender to purchase new vehicles. This, as he explained, would be fairer to future generations of vehicle owners, in the sense that everybody pays the same price, whether to enter or re-enter the market for vehicles. The question is: whilst it is fairer, does it make it cheaper for the first-time owners, compared to a situation in which existing owners are not required to tender? If existing owners were exempted, new aspiring owners need only compete among themselves. With existing owners thrown into the fray, so to speak, competition would be keener.

Mr Speaker: Dr Hong Hai, are you making a statement?

Dr Hong Hai: I asked if it was going to be cheaper.

Mr Speaker: Could you ask your question?

Dr Hong Hai: Yes. With existing owners thrown in, would it not be the case that competition would be keener, in the sense that existing owners, as a group, are older and they are richer? But because of the superior purchasing power of existing owners, the large majority of whom are determined to remain car owners, would it not be possible that the resultant bid price be pushed up? Sir, if this were to happen, would new owners not be disadvantaged? And if they were disadvantaged, could it still be said that the system was fairer to them?

Sir, I realise that this is a complex exercise in micro economic analysis and the Minister might need more time to study the data. If the Minister thinks that this could be a problem, could I ask him if he would consider exempting existing owners from bidding but requiring them instead to simply pay the quota premium on registering their cars? This would remove them from competing against new owners. At the same time, it would ensure that they pay their full share of the quota premium.

Mr Goh Chee Wee (Boon Lay): Mr Speaker, Sir, allow me to ask a few questions. First, concerning the taxis. Now that the taxi operators are required to bid for a licence or entitlement to register a new taxi, would the Government remove the control over the number of new taxis to be registered? In other words, let the market determine the supply and demand.

My second question is: if that is the case, if the Government decontrols, can an individual come in and bid for a licence to own a taxi? Or can a group of individuals come together, register a company and bid for licences to own taxis?

My third question is about motorcycles. In the open category, the motorcycles are lumped together with all other categories of vehicles. By so doing, would that not result in motorcylces being squeezed out? Because I do not think the motorcyclists are able to bid the same price as the car owners. Is it the intention of Government to squeeze out the motorcycles?

Dr John Chen Seow Phun (Hong Kah GRC): Sir, I question the necessity of having the road tax surcharge on vehicles older than 10 years. Under the new policy, vehicles older than 10 years will already have to pay the prevailing quota premium to keep his vehicle for another 10 years. Furthermore, this prevailing quota premium is expected to go up over a period of time. It may also be aggravated by any reduction of the ARF mentioned by the Minister.

Mr Speaker: What is your question, Dr Chen?

Dr John Chen Seow Phun: Can the Minister consider removing this double whammy surcharge? The Minister also mentioned that he would reduce the ARF by the end of the year. My question is: what kind of quantum is he talking about? Because any reduction of ARF would eventually be transferred to the quota premium and therefore it would be seen as increasing the quota premium.

Mr Speaker: Can I remind Members that under the Standing Orders, they can only ask questions on a Ministerial Statement. If they want to debate the issue, they can always give notice of motion.

Dr Wan Soon Bee (Pasir Panjang GRC): I would still like to ask the Minister a more fundamental question, ie, whether the Minister agrees that the sole objective of implementing the quota system is to control the vehicle population growth. If that is the case, whether there is any reason to include the taxis in the quota system, and that by including the taxis in the quota system, the operating cost of the taxis will fluctuate and escalate tremendously, especially when the diesel tax has just been raised seven-fold from $1,100 to $7,700, and that all these increases will threaten the livelihood of the taxi drivers.

My second question is whether the Minister is aware that if the ARF is reduced, the quota premium will increase tremendously and therefore the cost of buying taxis will also increase tremendously, thus threatening the taxi trade altogether?

The Parliamentary Secretary to the Minister for Foreign Affairs (Encik Yatiman Yusof): Sir, I have three questions to ask the Minister. First of all, the Minister mentioned that if a potential motorcyclist would like to buy a motorcycle from the common pool he has to pay 1/3 of quota premium. The question is, on what basis is he fixing the amount at 1/3 of the quota premium? Can it not be 1/5 of the quota premium, bearing in mind that the cost of motorcycle is a lot lower than 1/3 of the average motorcar price.

The second question is: The Minister has introduced a surcharge of 10% for a car which is more than 10 years old. Since the Minister has, in his statement, indicated that the target objective of this exercise is to prevent cars from breaking down, is his Ministry not contemplating on looking for other more effective alternatives, for example, imposing heavy fines for cars which are more than 10 years' old whenever they break down?

The third question is, since the Government policy is to find the source of traffic jams and penalising those responsible for causing traffic jams, would the Minister or his Ministry consider the possibility of being a bit strict to impose a ruling against the parties which are responsible for causing traffic jams, such as PWD and PUB, because of their frequent digging of the roads? They too cause traffic jams.

Dr Yeo Ning Hong: I thank Members for their various questions. Sir, I thank the Chairman of the Select Committee for agreeing generally with the overall structure of the quota system. His first question is, should we not maintain the increase of vehicles at closer to 4.2% which is the overall long term increase? We can, Sir. But it means we pay a higher price in terms of congestion. What we are trying to do is to start off at close to the long term trend and then gradually bring it down. Because as I emphasized earlier on, even at 2 1/2-3% growth, in the long term we will still be seeing heavier and heavier congestion on our roads.

If I could give simple illustration. In traffic engineering terms, what does a 3% increase of vehicles on the road mean? If the 3% more vehicles are spread evenly, traffic junctions which are experiencing traffic congestion at the moment will see an increase in waiting time for vehicles using those junctions. Motorists using those junctions will now have to spend, on the average, two more minutes per junction. So if you are going to work and you use three of such junctions, where the traffic already exceeds the capacity of the road or junction, then you have to add, on the average, six more minutes for that trip, if you make it next year with a 3% increase in vehicle population. So we have to strike a balance. If we want to allow a large increase, then we must be prepared to live with even greater congestion. Sir, I think the range of 2 1/2-3% is something that we can probably live with. To go any higher means that we will have to have more people on the roads wasting more time going to and from work.

Dr Hong Hai asked whether it is possible to exempt existing owners of older vehicles from the tender system. Again we can do it that way. It will make very little impact on the land transport policy itself. But I think it will be unfair to first time owners because then existing owners will be free from the need to tender together with everyone else. I think the larger the pool of vehicles there are for people to tender, the better it is and the smoother and smaller will the fluctuations be. If I could illustrate. If existing owners do not have to tender, then we will start off with only 7,000 vehicles for tender, and not 14,000. Then in the fourth quarter, if existing owners do not tender, the number will be reduced to only 4,000; instead of 14,000 in the first quarter under our existing scheme, 11,000 in the fourth quarter. So requiring existing owners to tender will be fairer for first time vehicle owners.

Mr Goh Chee Wee asked whether Government can remove the controls for the number of taxis on the roads. The Government does not control the number of taxis on the roads. The taxi operators are allowed to have any number of taxis. What they need to do is inform the Ministry. Indeed at the moment the allocation to the various taxi operators far exceeds the number of taxis on the roads. We have left it to taxi operators to decide whether they want to use up the full quota that has been allocated to them or whether, looking at the overall market circumstances, they prefer not to move too rapidly in that direction.

Mr Goh also asked the question of whether the motorcycles will be edged out in the open category. We have taken cognisance of that possibility. That is why we require anybody with an open entitlement to pay only one-third of the premium instead of the full premium. This is if he wants to buy a motorcycle to provide some measure of protection to future owners of motorcycles.

Sir, Dr John Chen asked why we need to impose the 10% surcharge for old vehicles. As I have explained earlier on, over the last three years we have seen a very rapid increase in the number of old vehicles, an increase of 70%, growing from 55,000 to 93,000. I think all Members will agree that this is not a healthy trend. Therefore we need to do something just to moderate that particular rapid growth.

As to the quantum of the ARF or import duty or both that we would be reducing, can I ask for a little time to study this problem rather than to make any announcement at this stage. I hope to be able to make the announcement before the end of the year.

Sir, Dr Wan Soon Bee has spoken up very eloquently, as he has always done in the past, on behalf of taxi drivers. Yes, the operating cost will go up. But as I have shown in the table circulated earlier, it is not a cost increase that will make taxis not affordable to Singaporeans. For taxis, we are talking of an increase of about 0.4 cents per km.

Dr Wan also suggested that by reducing ARF we will in effect be increasing the quota premium. If that is so, then I take it that Dr Wan is not in favour of the Government reducing ARF in the longer term.

Sir, Encik Yatiman Yusof asked whether it is possible for people wanting to buy a motorcycle with the open entitlement to pay a premium lower than one-third. He suggested a figure of one-fifth. Sir, the Ministry has explained on a number of occasions the issue of the road space that a motorcycle occupies on the road. The Government knows that owners of motorcycles are normally from the lower and middle income group. Therefore we have brought the figure down from seven-tenth to a third. We have done that for the ALS fees. It has worked well. I think we should start off with a third. And maybe over the longer term, we can have a review to see whether this is indeed a reasonable ratio to use or whether we could bring it down a little further, as suggested by Encik Yatiman, to something like a fifth. But let us operate the system and see how the flexibility that is built in can cope with the changing circumstances and the different demands of the economy.

Encik Yatiman Yusof also suggested heavy fines for vehicles that break down on roads, to tackle the problem at its root. Sir, this is a good suggestion. It is somenting that is worth considering. What we really want is to encourage individual vehicle owners to exercise a sense of responsibility, of maintaining their vehicles in a manner that will not break down on the expressways or on busy roads. I am sure Members must have travelled on the expressways and have seen on the othe side, three, four, kilometres of vehicles not moving at all or hardly moving at all because a vehicle in front had broken down.

His other point is congestion caused by PWD. Sir, we will encourage PWD to carry out as much of its work in a manner that will minimize inconvenience to the public.

Dr Wang Kai Yuen: May I ask the Minister whether under the quota system the premium to be paid by a taxi operator under the prevailing rate will be for a 10-year period. I am sure the Minister is aware that the taxi has a mandatory lifespan of seven years. Would he consider allowing the taxi operator only to pay 70% of the prevailing rate rather than 100%?

I have another question for the Minister. To prevent speculative bidding by individuals, would he consider levying an administrative charge every time a bid is tendered?

Dr Wan Soon Bee: I just want to clarify regarding the quota premium. I am not against reducing the ARF. What I mean is that if this is reduced and the taxi has to pay for the quota premiums, that means taxis are going to pay more and more and, in the longer term, the taxi will be so expensive that I do not think they will be able to afford it.

Dr John Chen Seow Phun: Sir, the Minister did not answer the question. Is he aware that the figures that he gives on the rapid increase of old vehicles were under the old circumstances? But under the new policy, you are going to have this prevailing quota premium that is to be levied on the old vehicle owners. So why then do you want to have these double measures? That is the question. I believe that the quota premium will be effective enough.

Mr Heng Chiang Meng (Cheng San GRC): Sir, I have several questions. I think here I would like, with your indulgence, just to preface one question with a suitable quotation from the Minister's statement.

Mr Speaker: Could you get to the point and ask your question, Mr Heng?

Mr Heng Chiang Meng: Here the Minister said: "The Government does not intend to use the transport policy as an excuse to collect more revenue." I believe he said that twice. In that case, would the Minister be prepared to consider the concept of direct subsidy for bus services as a very, very special case, and that is, perhaps to ask SBS and TIBS to provide a better, more comfortable, and really a first-class service, at very affordable prices, so that the difference in the revenue and cost could be subsidised from the quota premiums collected?

Sir, the second question is: would the Minister consider another system of tender bids other than the Dutch system of the lowest successful bid? Because I believe that the proposed system would encourage irresponsible sky-high bids by persons who think that they would not be the highest. And if sufficient number of people think that way, then the lowest successful bid could be very high.

Sir, the third question is: when the quota system is in place, and since the quota premium will be double for company and commercial vehicles because of tax benefits, would the Minister consider the removal of the $35,000 limit ratio for tax deductible items for all expenses relating to such vehicles or, at least, increase it? The rationale for the $35,000 may no longer be there since it is not a tax collection item, but more for control of loopholes.

The fourth question, Sir, is: would the Minister permit the existing owners of cars with PARF a grace period of 10 years, instead of (10-x) years, and let them decide at the end of the tenth year of the life of their car, whether they want to scrap their vehicle, take advantage of the PARF value and bid for a new car, or to continue retaining their vehicle until the end of the grace period, so that they do not have to pay for the quota premium and lose, in that case, the PARF value? If these owners opt for the first alternative, effectively they are back to the (10-x) years system.

The fifth question is: would the Minister tell Parliament the additional revenue to be collected as soon as it is feasible or as soon as the information is known to the Ministry? Could he also tell Parliament the effect on inflation for this year as a result of this new quota system, although he did, Sir, stress that the effect will be minimal. I am sure most Parliamentarians here would like to know the actual effect.

Mr Lew Syn Pau (Tanglin): Mr Speaker, Sir, I am asking a question regarding the taxi business. So I would like to declare my interest.

Would the Minister consider giving the taxis a totally separate quota without having to link it to the private car category of 1.0 to 1.6 litres? Let the taxi drivers themselves and the taxi organisations bid and set the price.

Dr Yeo Ning Hong: Sir, Dr Wang Kai Yuen has got a very good point, namely, since the taxis have got a mandatory lifespan of seven years, is it possible for the quota premium to be pro-rated to seven years. It is possible, but there are also other categories of vehicles with mandatory lifespan. So I would like some time to consider this possibility. I do not think the taxis are in any way severely disadvantaged if they were to pay a 10-year premium like everyone else. If they scrap their vehicles after five or six years, they will get the rebate.

Whether there should be an administrative charge for the tender. We can look into it. It is a good suggestion to ensure that those who tender are serious.

Sir, Dr Wan Soon Bee came back to mention that taxis will be affected if we reduce the ARF. That is true. But we should remember that taxis pay very small ARF. In fact, taxis do not pay any PARF at all, particularly if they scrap their vehicles early. So some adjustments of ARF for other vehicles will have an impact on the taxi drivers. We will have to look at that carefully as we make the adjustments.

Dr John Chen believes that the measures under the quota system would be adequate to contain the rapid growth of old vehicles. Let us look at the actual figures and see whether it does or does not have that salutary effect.

Mr Heng Chiang Meng has five questions. Whether we should have direct subsidy for buses to make bus fares affordable - I believe, Sir, at the moment, bus fares are very affordable. They start off at 15 cents for feeder services and 40 cents for trunk services and they go up to a maximum of 80 cents. I believe it is very affordable. Some 2.8 million passenger trips are made on buses every day. Assuming eash passenger takes two or more trips daily, that means that avout 1.2 - 1.3 million people use buses everyday. That represents a very sizable proportaion of the population.

Government has already made subsidies in a number of different ways. We have built the bus interchanges, we have built bus stops, and we have kept the scheduled buses out of restraint measures such as ALS and the quota system. We have indeed been giving special preference to the buses. As for subsidy, the Government has already made a very massive subsidy for the MRT system. Government has already spent $5 billion. We intend to spend more in due course, when the need for more extensions of the MRT system becomes clearer.

Mr Heng suggested that the scheme where everybody pays the lowest successful tender price, regardless of what the bids are, may lead to irresponsible tendering. Sir, let us give the system a try. It may lead to a more rational bidding where pople bid what they are willing to pay. This approach, we believe, is fairer. Because it means that at any one time all the people bidding in one particular category will pay the same price, rather than different people within the same category at the same tender paying totally different prices. But I will bear in mind the proposal of the Member and look at it in due course.

Should we remove the restrictions on the quantum that companies can deduct for tax purposes by way of expenditure on "Q" cars? We can look at that. But my belief is the present allowances are adequate. It is a matter that I will ask the Finance Minister to review, if necessary.

Mr Heng has also suggested a more generous scheme of giving all existing owners a 10-year grace period. We can be more generous, but, as I said earlier, when we are generous to one group, we in effect are being less than generous to the others. We have to strike a balance. I think giving (10-x) years means that existing owners do not have to worry about the quota system immediately. It will give them time to adjust to the quota system, because even the owner of the oldest vehicle is unaffected by the quota system for at least two years.

Whether Government could give figures of revenue collected, yes, these figures are indeed given every year when ROV reports to Parliament. Similar figures are also available, I think, in other reports from the Ministry of Finance and also the reports on customs duties. They are available to the public.

Mr Lew Syn Pau suggested that we have a separate category for taxis. Sir, we considered that possibility also, except that taxis represent an extremely small group. There are only about 11,000 taxis at the moment. Even if we assume that they have got an average lifespan of six years, we are talking about a replacement level of about 2,000 per year, which means about 500 per quarter. That is a bit small. There are too few players in the market - four or five players - and the opportunities for collusion are high. I think it is fairer to all to put them together with the large category of 1.0 to 1.6 litres of cars.

Mr Heng Chiang Meng: I have some points of clarification because I think the Minister has misunderstood me on some points. Sir, on the question of subsidy, I am aware of the various forms of mini-help that has been given to the bus services. But I am talking about a major one like if the Ministry were to tell SBS and say, "Look, we like you to air-condition all your buses. We like you to provide better frequency. How much will it cost?" Say maybe $100 million. If so, the Ministry could say: "However, we like you to only charge $60 million to commuters and the other $40 million will be subsidized by us". I am talking about that type of subsidy so as to encourage better usage of buses.

Sir, on the other point about (10-X) years, again I think the Minister has misunderstood me, because I am not talking about all vehicles. I am talking about car owners with vehicles having the PARF value, which means that if they opt for the full 10-year grace period, they lose their PARF. So it is not a more generous concession. The concession depends on whether the owners of these cars want to take advantage of it or not.

Finally, I am aware that the revenue figures would be available in the annual report. But I did say that I hope the Minister will give to Parliament the revenue figures as soon as they are available, and not to wait until the following year when the annual report comes out. I think he has also missed out the question on inflation.

Mr Speaker: Dr Yeo, do you want to take that first?

Dr Yeo Ning Hong: Sir, as I mentioned earlier, the bus fares are affordable at the moment. Should we air-condition all buses? I think it is a question best decided by the market, rather than for Government to impose that all buses in Singapore should be air-conditioned. The danger with subsidies is that when you are subsidizing something, you lose a sense of what the market needs and what the market is prepared to pay, and then you may end up with wastage. The Government is prepared to subsidize major infrastructure, such as MRT extensions. But when you are subsidizing direct consumption, I think the Government prefers to move more cautiously. There is this fallacious belief that Government's money is nobody's money. Government's money belongs to the people. The more we spend Government's money in one area, the less of Government's money we have left to spend on other things. So if we subsidise airconditioned buses, when people may not really want to have airconditioned buses, then it means that we have got to spend less on health, on education and the list of other things which the Government is already subsidising.

Mr Heng Chiang Meng: It is incidental and not the main purpose.

Dr Yeo Ning Hong: Money collected for use of roads is a national asset. It belongs to the people and it should be managed carefully in a manner that will benefit the largest number of Singaporeans.

Sir, I apologise for not understanding completely Mr Heng's suggestion of 10 years for all vehicles with PARF eligibility. In other words, he is saying that all cars less than 10 years old, ie, eligible for PARF, would be given this very special privilege. I think it is very invidious to say that this group of people ought to be given something extra special, a 10-year grace period, whereas all the other vehicle owners will only get 10 -X years. I think it is not fair.

Revenue figures to be given as soon as possible, yes, we will provide that as soon as the data is available. The Member can always ask an Oral Question whenever he thinks that the answer should be forthcoming.

Yes, the quota system will add to the cost of operating a car and therefore eventually will feed back into the total economy. But as I have shown with the figures earlier on, the increases are small, in the order of cents per kilometre. The Ministry of Trade and Industry will be monitoring business cost carefully.

Sir, Dr Hong Hai has also earlier on mentioned two other points which I failed to go into at some length. He asked whether by reducing the quota from 4.3% overall growth to 2 1/2-3%, we would cause a rush in the first few quotas. I do not believe so. As the numbers are made public, the public will make their own calculations. We will be providing the figures at least two quarters in advance. We start off by figures for four quarters, the figures available to Members of the House. Then we will give figures two quarters ahead of the tender so that members of the public can do their own calculations.

He also asked whether existing owners will force up prices for the new owners. Again, I do not believe so. The more people there are tendering in the pool, the more likely it is that we will get a more even price. If we exclude the existing owners, then it will be the new buyers wanting to tender. Numbers are smaller but the quota is also proportionately smaller. I gave as an illustration the figure of 7,000 for the first quarter, if we only require new buyers to tender. If we allow a total of 14,000 for the first quarter and those who want to scrap their vehicles will also have to tender, then it will be a much larger pool. I think having a larger pool is more likely to lead to a fairer tender system, than having a small pool and exempting the existing owners from that requirement of having to tender.

Dr Arthur Beng Kian Lam (Fengshan): Mr Speaker, Sir, I have three questions. (1) Should the certificate of entitlement be made non-transferable for a certain period within the 6-month validity period, eg, a 3-month period, as I also share the concern of other Members of the House regarding speculation?

(2) Will the Minister reconsider the necessity for a quota system if the ERP and other methods of utilisation control and traffic management are successful in controlling traffic congestion? Sir, I ask this question because I support the quota system only as an interim measure.

(3) Does the Minister not agree that the quota system is not that fair after all as the payment for vehicle owners is now up-front? The hypothetical examples given may seem reasonable, but it is in fact an upfront payment. This is a cause of concern for those in the lower income group buying motorcycles and for the taxi driver. The taxi driver is in fact paying tax on money yet to be earned, ie, money to be earned for the next 10 years. Will the Minister consider allowing instalment payments for taxi drivers?

Mr Leong Horn Kee (Thomson): Sir, may I ask a few questions as well? First, I think the Minister has not said this, but I presume that the quota that is being bid is transferable during the 6-month period. In this case, in the initial stage of the implementation of the scheme where the quota is being given every three months, I am afraid there could be certain cartel groups that may want to try to profiteer from the scheme by cornering some blocks of quotas and then sell them off at a higher price. May I ask the Minister whether he will take special care to monitor such situations in the earlier period, and especially if he could consider whether the quarterly bidding period can be reduced to a monthly quota as soon as possible, even on a different category basis instead of doing all at the same time. In this way, the chances of cartels trying to profiteer from the quota scheme would be minimised.

The second question is that though the validity of the quota is for six months, there are people who have booked for cars that may take more than six months to be delivered. This is not due to any fault of their own, and they find that their certificate has lapsed before their cars are delivered. Could such special cases be considered for extension?

The other issue I would like to ask the Minister is this. I just came back from Hong Kong and I am very impressed by the city planning in Hong Kong, whereby they have inter-connecting linkways, passages, between buildings and shopping centres, which minimise the number of pedestrian traffic on the ground level, thereby not adding to the congestion on the roads. Could we not have the same arrangement whereby pedestrians are taken away from the roads and they either go above ground or below ground in Singapore?

The last point is that I am quite attracted to the idea of a weekend car. Perhaps in this case the Minister can consider having special distinguishing features for weekend cars. This is not to say that they are going to be painted with tricolours or rainbow colours, but at least they have special number plates or colour plates whereby if they are used on non-weekend periods they may be subject to fine by the Traffic Police. Otherwise, they can be used on weekends, or we may even consider that these cars can normally be used in other parts of Singapore except for going into the CBD during weekdays. There are many people who are not working, like housewives and various categories of people who need a car to fetch their children to school or to do marketing but they do not need to drive a car to work. Such category of people can then be given a special label or special registration number whereby they can use their cars at certain periods.

Mr Chiam See Tong (Potong Pasir): Sir, I would first like to ask the Minister a very basic question. His Ministry has opted to tackle the road congestion problem by curbing car ownership. Has his Ministry in fact studied all remedies in relation to car usage and to keep down car ownership? Has his Ministry made a thorough study to opt for this system at the moment?

Sir, the quota system, of course, is liable to mistakes. The Government could make a mistake on the estimation of the quota. Is his Ministry willing to make it cumulative in this quota system? Assuming that this year you have a lower quota, can this excess be carried over to the next year?

I wonder whether the Minister will say that, in fact, there is already an inherent inequity in regard to items (4) and (5). You have got six categories in item (5) and we see that in each category you only have got the capacity. I think it is a well known fact that some cars are cheaper than other cars. Of course, those who bid, say, for $10,000 and opt to buy an European car which is more expensive, he will proportionately pay less, as compared to the cheaper Japanese or Korean models. That is in fact already an inequity there, because proportion-wise, the expensive car will pay a lower percentage of the quota premium.

Also in regard to item (5), I can see that there is an inequity there.

Mr Speaker: Mr Chiam, can I direct you to ask your questions?

Mr Chiam See Tong: I am asking the Minister whether there is any inequity.

Mr Speaker: Yes. Please be concise with your questions.

Mr Chiam See Tong: Yes. Will the Minister say that in fact there is an inbuilt inequity in the 20% open category in relation to the small cars and to the motorcycles, as Encik Yatiman Yusof says that they will be squeezed out. Will the Minister be willing to reduce these two open categories in regard to small cars and the motorcycles, say, to 10% or less?

Sir, can the Minister say what is the effect of the quota system on Government revenue? Will additional income from revalidation exercises offset losses of revenue from the falls in ARF?

In regard to old cars, it is a pity that they are going to put a surcharge on them because I will be affected. The Minister has given data that half of the cars more than 10 years old failed in their fitness test. But can he give us the data whether or not the number of cars that break down on the roads are in fact old cars? The fact that people keep old cars and they take good care of their old cars, it is very unlikely that old cars will break down. Perhaps the Minister could give us some data on the breakdown of cars and whether they are old cars.

Sir, in regard to infrastructure, it is good to know that the Government will continue to build roads, overhead passes, underground tunnels and so forth. But for the time being, is the Minister willing to give assistance to shuttle service between MRT stations and private and public estates? I think this area of transportation will have to be looked into by the Minister, since he has announced that he is willing to exempt scheduled buses from the quota premiums.

Dr Yeo Ning Hong: Sir, Dr Beng and Mr Leong asked whether the certificate will be transferable. These are details which I have not touched upon this morning. We are very conscious of the possibility of cartels being formed, particularly when the scheme is new and people are not familiar with how it operates. ROV is looking at this matter and will give the details of implementation of this scheme a little later.

But I want to assure the House that the scheme will be devised in a manner that will not permit a cartel to be formed, nor would we allow people to use the quota system as a means for speculation. It means it will be a little inconvenient for some people. Later on, when people are more familiar with the scheme, and as the system evolves, we will be a little more relaxed. But we start off being a little more restrictive. The important thing is to safeguard the interests of the people.

Dr Beng asked whether it is possible to dismantle the quota system after the ERP is available. Let us proceed one step at a time. Let us look at the ERP and how effective the ERP will be and how early we can distribute the traffic, particularly during peak hours. The more we are able to distribute the traffic over time and space, the more we can allow the number of vehicles to increase.

The quota system is not fair because it is upfront. Sir, the purchase of vehicles is also something that buyers pay upfront. I would expect that in due course finance houses will work out their own scheme where some financing will take place. I want to point out that Mr Chiam, in the last debate, did specifically say that he was very much against the idea of financing and that it should be loaded upfront to make it more difficult for people to own cars. So we have different points of views.

The taxi drivers will well taken care of by the taxi operators, in particular by NTUC Comfort. They have schemes where taxi drivers pay over a period of years to minimize cash flow fluctuations.

Mr Leong also suggested that we move quickly to operating the tender system on a monthly basis. We want to do it as soon as possible. But let us give some time for people to get used to the system. I want to point out that when we move to a monthly tender system, the number of vehicles available for each tender will effectively be diminished by two-thirds. So the quotas become smaller and when the numbers are too small, particularly when we have so many different categories, the probability of fluctuation, will be higher. So let us give a bit of time for people to understand and to operate the system.

Validity period of six months, I have gone into the pros and cons. We can look at it as we go along and see whether there is a real need for it to be extended or not. The proposal for better linkways along the roads to make it more convenient for pedestrian to move from place to place, I believe the Minister for National Development has already announced an extensive programme to beautify Singapore, to make covered walkways and linkways from various key points of interests, commercial centres, etc. I am sure the Ministry of National Development will be doing more and more of such programmes in due course.

I thank the Member also for his suggestion that weekend vehicles should be given different plates so that they can be easily distinguished from the rest, otherwise it would be open to abuse. It is a good suggestion.

Mr Chiam has asked whether we have looked at all remedies. Sir, Mr Chiam spent five months on the question of land transport. He knows the possible remedies. We have looked at all possible remedies. We have looked at them in great detail. There are no more convenient, useful, practical, effective measures that we can apply. We have exploited the Area Licensing Scheme to its fullest. We have managed to protect the central business district from severe congestions in the mornings and in the evenings. But that is really the limit, because to go further, we would have to introduce a full-day ALS.

Mr Chiam See Tong: Increase your car parking fees.

Dr Yeo Ning Hong: Increase car parking charges, yes. We will look into it. But I think we will also need to bear in mind that if we increase car park charges, we increase the temptation for those who would park their vehicles illegally. Then they will create more congestion. So there is a balance. But it is something that we can look into. We can have an increase in petrol duty. But you know the problem of abuse , the easy way of bypassing that particular measure.

Mr Chiam See Tong: Increase it only in the CBD areas.

Dr Yeo Ning Hong: Increase the car park charges in CBD areas? We will bear that in mind, and maybe at the next exercise make an adjustment. The kilometre tax? These are some of the different suggestions that have been made and have been looked into.

Mr Chiam asked whether a quota, if not fully used in one quarter, will be carried over. Yes, it will be carried over into the next quarter.

Is there an inherent inequity in the six different categories because cheaper vehicles in each category will pay more percentage-wise? When we move towards a fixed dollar tender system, then obviously we are talking about dollars. We are no longer talking about percentages. If you pursue that argument then you will say that it is also unfair to charge a big car and a small car the same parking rates.

Mr Chiam See Tong: They take up the same space.

Dr Yeo Ning Hong: Exactly, they take up the same space. Similarly, they occupy the same road space and therefore they should pay the same price, regardless of what the value of the vehicle is. Otherwise, you will say old cars will have to pay less because an old car has less value and so on.

20% open category - is it unfair to the motorcycles and the small cars? Again, the same argument comes forth. For motorcycles, we have already made a special case for them where the premium that they are required to pay will be kept at one-third. Small cars, as Mr Chiam rightly pointed out, occupy the same road space. For the time being, let us keep it as it is and let the system work itself through.

Will the additional income from the quota system offset the reduced collection as a result of fewer vehicles registered with ARF?

Mr Chiam See Tong: Reduction of ARF.

Dr Yeo Ning Hong: With the reduction in ARF. Sir, the reduction of ARF is a subject that will be taken up a little later. It is not possible at this stage to decide whether the reduction will be offset or otherwise.

Do we have any data on the breakdown of vehicles on the roads and whether they are caused by old cars? Sir, the answer is no. We do not have the data, because people do not report breakdowns of vehicles to the Government. When your car breaks down you do not report it. Therefore there is no way in which the Government can have that data. But, yes, it is commonsensical to believe that old vehicles, on the average, must be less road worthy than new vehicles.

Let me give some figures on the failure rates of major systems among vehicles 10 years and older. Structural problems, for old vehicles - 15% of them failed. Wheel system, in other words, something wrong with the wheel, 27% of them failed. Propulsion system, 13% of them failed. Braking system, 19%. In other words, one car out of five old vehicles has got faulty braking systems. Steering system, 14%; body, 22% and other faults, 15%. They add up. It is true. It is only commonsensical that older vehicles are less fit than newer vehicles.

The next question is whether we will have more shuttle services. The bus companies have already initiated and are operating shuttle services. So far, they have got five services operating. This is an area where I would encourage management committees of condominiums or private housing estates or residents associations to get in touch with the bus companies. If they can carry out surveys which indicate a need for such services to be operated , then the bus companies can look into the demand. The bus companies have also indicated that they are looking into the possibility of running mini-buses to such estates.

Mr Chay Wai Chuen (Brickworks GRC): Sir, I would like to ask the Minister two related questions. (1) Should the Minister consider freezing the ARF and the PARF rate currently so that the bid for the licensing and the quota system can be conducted without undue expectations and uncertainty and with greater transparency, and also bearing in mind that such changes in the ARF and the PARF rate now will affect the personal networth. (2) Related to this, will the Minister consider implementing the quota system and the licence bid system without dismantling the ARF and PARF system, bearing in mind that both the quota system and the PARF scheme can co-exist without contradiction and without bias, revenue and cost effects?

Dr Lee Siew-Choh (Non-Constituency Member): Mr Speaker, Sir, the Minister has enunciated very laudable principles. He says he does not intend to use transport policy as an excuse to collect more revenue. And he wants to be fair to all. That is the most important consideration, he says. As I have said, they are very laudable principles and aims but, unfortunately, the measures that he has suggested do not seem to be consonant with these two principles.

Mr Speaker: Dr Lee, will you ask your question?

Dr Lee Siew-Choh: Yes, I am going to ask him the question. This is the preface.

Mr Speaker: Dr Lee, may I direct you to ask your questions. It is not possible to make speeches.

Dr Lee Siew-Choh: Yes, I understand. He has enunciated a new system of quotas. He has also mentioned something about PARF. Therefore, I ask, why not extend the PARF from 10 to 15 years? After all, cars are built to last longer than 10 years. He says he wants to be fair. Therefore, he should be fair, especially to those people who cannot afford to change cars so easily. If he wants to be fair, then there should be no surcharge whatsoever.

Of course, that is linked to the quota itself. Therefore he should extend the grace period to 15 years as well. As I have said, that will help those who are not so well off and also help small businesses, and especially the spare parts dealers. Moreover, it will also cut down loss of foreign exchange.

Mr Speaker: Dr Lee, can I direct you to ask your question?

Dr Lee Siew-Choh: Sir, the Minister has also said that he does not know how much the quota premium is.

Mr Speaker: Dr Lee, if you do not proceed to ask your question, I have to direct you to resume your seat.

Dr Lee Siew-Choh: To be fair, why not fix the sum for the quota premium, instead of allowing people to bid for it? Because if you bid for it, you will bid it on the basis of price. Last time, during the debate, I suggested a quota on the bases of need, but no answer was given to that suggestion, whatsoever. Even today he has not mentioned it at all. Therefore, if ---

Mr Speaker: Dr Lee, do you have any more questions?

Dr Lee Siew-Choh: Yes, Sir, I am coming to it now. Therefore, if it is going to be a matter of tendering, let the tenders be put in. But in order to be fair to all, why not ballot the tenders? Everybody will realise then that he has an even chance. Otherwise, only those who are better off will have the advantage. That won't be fair at all, Sir.

Dr Tan Cheng Bock (Ayer Rajah): I want to ask two simple questions. Can the Minister allow the payment of the licence fee to be spread out over a 10-year period, instead of a one-time payment? The other question is about vintage cars. I sympathise with Mr Chiam because I do own a 22-year old car and, like him, I also have to pay. But I can assure the Minister that these cars that we own are not that bad and we are prepared to give him a ride.

Mr Goh Chee Wee: In answer to my question just now, the Minister said that there is no control over the number of new taxis introduced on the road. But I believe there is still a quota. The taxi operators have to apply and each of them is given a limit, a quota, on how many new taxis that they can introduce. But of course, as the Minister said, the quota is large, so that the taxi operators can actually introduce new taxis as and when they wish. My question really is whether there would be a complete de-control. And hence my second question, which the Minister did not answer, is: can an individual or group of individuals come together and then form a company, and bid for the entitlement to own taxis? I will give an example of the yellow-top taxi drivers. Presently, the yellow-top taxi drivers are not allowed to transfer the vehicle ownership to their children. So can their children go and bid for a licence to own a taxi?

Dr Vasoo: I would like to ask the Minister three questions, Sir. The Minister has talked about a lot of deterrents and disincentives. Would the Minister consider some road tax rebates for people who use the roads less? From the takings that he has got from the tenders, would he give rebates to the existing car owners?

Secondly, in the event there is cartel, what intervention does the Government have to ensure that there is no cartel formation in the tendering system?

Thirdly, since there is a significant drop in the number of motorcycles registered, I am suggesting whether the one-third premium on open entitlement could be reduced significantly, in the light that many motorcyclist are low income earners.

Dr Yeo Ning Hong: Sir, Mr Chay suggested that we freeze the ARF and PARF and operate the two systems independently. The two systems ie, the quota system and the ARF/PARF scheme will be operated independently. But freezing the ARF means that we will not be able to reduce the ARF, which is what I believe the Select Committee has recommended. I understand the interaction. In fact, it is the interaction between the ARF and the quota system that makes the ARF problem complex and, therefore, requires additional time for us to look at it carefully.

Dr Lee suggested extending PARF to 15 years. Sir, he has obviously not listened to the figures that I have quoted earlier on, to show that vehicles over 10 years do have very serious problems and therefore we should discourage rather than encourage their rapid growth. To give PARF for 15 years means that we encourage more and more old vehicles on our roads. And when a vehicle breaks down, other road users pay for it by way of increased wastage of time. All road users will have to spend another half an hour, 40 minute, 50 minutes, stuck behind that vehicle particularly if it broke down during peak hours and at a critical junction. So a cost has to be borne by people who have got nothing to do with the owner of the old vehicle. While it is obviously advantageous to the owner to keep an old vehicle, it is disadvantageous to all the others. The same argument applies also to giving a grace period for 15 years. Yes, we can be a lot more generous to existing owners, but it will be at the expense of prospective owners of vehicles.

Whether we should have a fixed sum for the entitlement, and have a ballot? The Government has been operating a similar system all these years with the road tax and the ARF. The Government determines the ARF and the road tax and all the other levies that need to be made, and leaves it open to people to buy vehicles. It has been pointed out by the Select Committee that the quota system is more effective, more predictable than the old system. Dr Lee comes back to the question of need. We discussed that the last time. Need is very subjective. Everybody needs a vehicle if it is within his means to own one. We are aware of it. But as Mr Chiam pointed out, it is not possible to have everybody owning a car or a vehicle. So who is to assess whose need is greater? Let the individuals decide. Individuals have the choice to decide whether they prefer to spend their money on a vehicle or they prefer to take a bus and spend their money in some other way.

Dr Tan Cheng Bock suggested that we allow instalment payments over a period of 10 years. Sir, let us leave it to the private sector to sort it out. The private sector has already got the mechanism of spreading out the price of a car, ARF, and all the other costs through financing. Let us leave it to them.

Vintage cars? Sir, I can give a copy of the failure rates of old cars to the Member for his careful study. He may or may not be keeping his car in good shape. We are not able to ascertain. But as a general principle, It is quite obvious, (I am sure he will also agree) that the older a vehicle is, the more likely it is to have defects, which may not surface today, but will cause a breakdown some day and cause a congestion.

Sir, Mr Goh Chee Wee came back to say that it is not true that Government does not control the number of taxis allowable. ROV requires a taxi operator to indicate to the ROV the number of licences that it wishes to have. And we have been extremely liberal, as he himself pointed out. Many of the taxi operators are given licences to operate more taxis than they are currently operating. We have chosen to allow them to decide. But for purposes of monitoring the overall situation, we keep tab of the numbers.

Should we allow individuals to own taxis? This is a very old subject, Sir. The yellow-top taxis represent a legacy from the past where individuals who own taxis eventually become proxies for others who want to manipulate the system. We have been trying over the last decade and a half, to move away from that position. We will allow bona fide companies with the expertise in operating vehicle fleets, with the expertise to do good proper maintenance of vehicles, to operate taxis. Indeed, we have done so recently by allowing a bus company to operate taxis. We will free the market. But at the same time, the Government has the duty to the public and to taxi commuters. We want to make sure that every taxi is kept in good operating condition. And the best way of ensuring it is to have the taxis operated by companies. Then they can work out their own schemes, as indeed the NTUC Comfort has done, where NTUC operates a fleet of taxis but the taxis are in the names of the taxi drivers themselves. We want to have a good fleet of well maintained taxis for the benefit of taxi commuters.

Dr Vasoo suggested giving rebates to those who use roads less. Sir, that is the equivalent of a kilometre tax. I have indicated earlier on that it is not practical because any mechanic worth his salt can alter the odometer without much difficulty. It is to abuse. But I understand the idea and I appreciate his suggestion. The idea is similar to the concept of weekend vehicles, where vehicles that do not use the roads as extensively, particularly during the weekday peak hours, can be given special rates of taxation. We are happy to consider that.

Cartels? We will prevent it in the first place, rather than allow it to happen and then try to eradicate it. Motorcycles should be less than one-third, I think Mr Yatiman also made that appeal. We will operate the system, see how it works out, and if necessary, make some adjustments.

Mr Lew Syn Pau: Mr Speaker, Sir, when the Minister links the taxi quota premium to that of the quota premium for the 1.0 litre to 1.6 litre private car category and calls it a concession, I presume he thinks that the quota premium for this category of private cars would be lower than that of the 2.0 litre category. In the event that this does not happen to be true, then would he consider allowing the taxi operators to pay the lower of the two quota premiums?

Mr Goh Choon Kang (Braddell Heights): Sir, can I seek one clarification from the Minister? I want to know whether an individual bidder is allowed to bid for only one or more than one licence and whether he or she is allowed to bid for only one category or more than one category at a time.

Mr Chng Hee Kok (Tiong Bahru GRC): Mr Speaker, Sir, thank you for letting me join in this question and answer session. I would like to ask the Minister to review this question of PARF and ARF in relation to the quota system. Presently, as it stands, the quota system is a definite scheme. We know that it will control the number of cars because of the definite control numbers we set. So the point is that since this is to replace the price mechanism, contrary to what Mr Chay has suggested, I will say that we must work out a scheme whereby we can as quickly as possible phase out the ARF and PARF.

Initially, to be fair to the new owners, could not this licence fee be offset against the ARF? At the same time, those cars which are bought on this basis will not have the full entitlement in future in the case of scrap value or for PARF consideration. In other words, if there is a $5,000 licence, the new car owner will not pay anything more. This $5,000 is offset against ARF and this licence will affect the future value of his car. What we are trying to do is to progressively transfer the investment value on the PARF into the quota system. Then that will also not affect the present owners who will only be affected when their cars reach the 10-year old mark. In other words, by May, I am sure a scheme can perhaps be looked into whereby we do not retain both systems at the same time. We cannot have the cake and eat it. The price mechanism was to control the car population. We have the quota. Now, we say let us run both in parallel. I am suggesting that one should replace the other more gradually. I believe that by May, the Minister can present something positive in that area.

Mr Chay Wai Chuen: Sir, will the Minister be persuaded by me that he should not consider the recommendation of the Select Committee on the incorporation between the ARF/PARF and the licence bid system as divine? He should tread with caution on juggling between the ARF/PARF scheme and the licence bid rate.

Dr Yeo Ning Hong: Sir, Mr Lew Syn Pau asked whether we could give the taxi drivers yet another concession, namely, a choice between the preminums for 1.0 and 1.6 litre or greater than 2 litres, whichever is lower. Let us allow the system to operate before we jump the gun. I can understand his very special concern for the taxi drivers. I share that concern also, but we have tried to be fair. If he wants to be more definite and argue one way or the other, I am quite happy to consider his proposal, whether he wants to group taxis in the same category as luxury cars or whether he prefers it to be with the medium-sized cars which, I think, is a more reasonable and more sensible approach.

Mr Goh Choon Kang asked whether individuals will be allowed to tender and whether they will be limited. I have again not gone into the details of administrative measures. Yes, we will allow individuals to tender. And, in the first instance, to ensure that there is no abuse, we will restrict the number that individuals can tender for. But once the system is satisfactory, we should be quite relaxed about the limits. I would ask him to be a little more patient and allow ROV to work out the details and announce them in due course.

Mr Chng Hee Kok and Mr Chay Wai Chuen have totally opposing views. But I think the question by Mr Chng did clearly indicate that the subject is a complex one. Because at the moment there is a range of ARF and PARF paid by the different categories of vehicles. In due course when I make the announcement, I would go into all the details and from the explanation, it would be quite obvious to Members why it is indeed complicated.

No, we will not ignore the Select Committee's recommendation. We will look at it carefully. But I understand Mr Chay's point, which is we will operate the two independently. We will take into account the recommendations of the Select Committee because I believe they have got a good point, which is to find a mechanism, to find a way in which we can offset some of the additional cost that comes about as a result of the quota system. It is a valid point. But the ARF/PARF scheme is fairly complex because of its diversity in application to the different categories of vehicles. So give us a bit of time and we will untangle it a little. 4.21 pm