THE ECONOMICS OF CERTIFICATE OF ENTITLEMENT

Abstract

The Certificate of Entitlement (COE) is a rationing tool of the Vehicle Quota System (VQS). Implemented in Singapore on May 1990,the system requires people wanting to register a new vehicle, to first obtain a COE through an auction, by submitting a bid. Simply put, the COE controls the number of new vehicles that are allowed on the roads. This qualifies it as an ownership restraint measure. Policies drawn up to regulate vehicle ownership 1s not a new concept. There are existing measures that controls not only the ownership of vehicle but their usage as well. This is spelt out in Chapter 1. Among all existing ownership policies that combats congestion, the VQS is unique. This is because it is based on a quota rather than a fiscal measure. As such, it augments the existing price based policies. Is it advisable to incorporate a quota system with existing fiscal measures? Chapter 2 tackles this question by performing a cost benefit analysis. It concludes that fiscal policies are not as efficient as rationing systems in maximizing social welfare. This justifies the implementation of a quota system. Furthermore, economic growth in the late 1980s witnessed higher income which neutralize the fiscal instruments that were m place to hinder car ownership. This renders a quota system not only justifiable but necessary as well to check excessive growth in vehicle ownership.