CERTIFICATES OF ENTITLEMENT

Mr Low Thia Khiang asked the Minister for Communications (a) whether the relatively higher price of other categories of Certificates of Entitlement (COE), as compared to the price of the COE for 1,601 cc to 2,000 cc cars, was due to an imbalance of distribution of COEs; and (b) how does the Government fix and allocate the number of COEs to each category.

Mr Mah Bow Tan: COEs are allocated at the start of each quota year beginning in May. The total COE quota for a year is the number of vehicles deregistered in the previous year, plus additional COEs to allow for a 3% growth in the vehicle population.

25% of the COEs from deregistered vehicles are allocated to the Open Category. The other 75% are distributed to other COE categories, in proportion to the vehicles deregistered in each category. The additional COEs to cater to the 3% growth are distributed according to the vehicle mix as at the end of the previous year.

The supply of COEs in each category is therefore fixed at the beginning of each quota year in May. Both the supply and the distribution of COEs by vehicle categories are publicised well ahead of the bidding exercises to allow prospective buyers to make informed decisions.

As supply in each COE category is fixed, it is the demand for the month which will fix the COE price. The exceptionally low price of COE for 1,601 cc to 2,000 cc cars (Category 3 COEs) in the December 1997 tender exercise was not due to an imbalance of distribution of COEs but a lack of demand for Category 3 COEs for that month. In the January 1998 tender, the price of the Category 3 COE went up to $43,880, with demand exceeding supply by more than 1000%.