Monday, January 26, 2004

Straightening the Straits Times (5)

Ever since the “Whiter than white” piece appeared, I have been invariably labelled as a “Steve Chia defender” and “supporter of lose [sic] morals”. How one article can make me either mystifies me, especially when our revered Straits Times journalists regularly churn out “commentaries” to justify dubious causes.

In praise of conspicuous consumption
Looks like I’m not the only one embarrassed by the shameless spin put forth by Christopher Tan in his article, “COE puts vroom into the economy” (ST, Jan 17).

I’m sure many car owners would not hesitate for a moment to shove their Pirelli tires down Tan’s throat for his propaganda. A reader was so put off by it that he/she suggested on a Yahoo! forum that “perhaps the next SPH special report will feature how the SARS epidemic ‘puts more vroom’ into the healthcare, pharmaceuticals and coffin making industries”.

Tan’s “commentary” is quite positively the most pompous and arrogant piece of nonsense I have ever read, rivalling tobacconist David Tang’s article, “Numbers that cloud the issue” (which appeared in Asia Magazine many years ago), where Tang voiced his strong objection to the US government’s legislation against smoking, on the grounds that it has failed to address adequately the more serious issues of air pollution from cars and other risks to health. Tang’s smoke screen was blown apart by readers, and rightly so.

In his article, Tan claimed that the certificate of entitlement (COE) system “has actually been a huge boon to car buyer and the Singapore economy” because it “has ensured tens of billions of dollars keep flowing through the veins of the economy”.

Tan further argued that the COE system “has prevented vehicle sales from falling through the floor in adverse times” while giving “Singaporeans a much better chance at attaining their favourite goal: car ownership, as car prices are at their lowest in over a decade”.

As a parting shot, Tan maintained that the COE system is “an immaculate form of vehicle population control”.

However, Tan’s numerous postulations fail both tests of logic and statistics.

First, as a form of vehicle population control, the COE system is not immaculate but artificial and wasteful. Under this inefficient and expensive system, an unhealthy trend has emerged: Car owners are now encouraged to scrap perfectly functional cars and replace them with newer models because of the apparent “benefit” (i.e. scrap rebates) derived from such a practice.

As a result, old cars with old emission engines are being kept on the road because of their low scrap value, while their younger counterparts are being scrapped much earlier than the expiry of their theoretical lifespan for the opposite reason. If you delve deeper into the social and economic consequences of this form of car renewal, you will realise that the COE system is hardly as immaculate as Tan puts it. In financial terms, this is almost like the churning of investment-linked insurance policies, a practice that should similarly be shunned.

To justify his argument, Tan desperately tried to link the COE system with the vehicle export trade. “For a country that does not make a single car,” he argued, “Singapore has emerged as one of the major exporters of right-hand-drive vehicles, shipping thousands of vehicles – mostly between three and six years old” to various countries due to the scrap rebates in place.

However, Tan has misrepresented the harmful consequences with flawed reasoning. By linking the COE system with vehicle export trade, Tan attempted to obscure the casual link between loss of foreign exchange and early scrapping of cars, claiming that “the export regime ensures we earn some of that back”. It doesn’t take a mathematician to understand that as long as we earn only a portion back, it remains a deficit. And the deficit will widen if we repeat the process on increasing regularity.

Tan’s argument also begs the question: Is this a sustainable model for the growth of the car industry? Like the churning of insurance policies, it would be foolish to assume, as Tan has, that “the COE system has put substantial vroom into the car industry”, much less stimulate the economy. After all, how long can this scheme continue to hoodwink the entire populace into indulging in conspicuous consumption?

Flogging the demand/supply curve
As for making car ownership attainable for Singaporeans, that’s another bogus claim. Like HDB flats, you never actually own a car in Singapore. Under the COE system, you merely acquire the right to lease the car from the government for 10 years, after which you will have to fork out more money to retain the right to use your car. Why? Obviously, this will allow the government to milk car owners for all their worth.

Furthermore, there is evidence that the government has been under-issuing the number of COEs despite its pledge to increase it at the rate of 3% to cater to the demand of aspiring car owners. Just visit the following Web page at the Land Transport Authority’s website and check out the “Quota Allocation” files, and you will notice a shortfall year after year from 1999 to 2002 (figures for 2003 are not available). If we use 3% as the yardstick for increase, the total shortfall over these three years is 44,936 COEs.

Like the supply of land, one need not speculate why the government is reducing the supply of COEs deliberately. Anybody with an inquiring mind would have known that the main purpose of the COE system is to suck revenue from car owners. Unless Tan believes we will remain suckers in the foreseeable future, there is no room for such vroom.

Tan also implied that peripheral industries have benefited from the booming car sales. This is another feeble attempt to justify his argument, as there is no evidence to prove that all the benefits can be directly attributed to the COE system.

On top of that, Tan’s questionable use of statistics should not go unchallenged. According to him, two-thirds of last year’s car sales (almost S$7 billion based on S$85,000 per car) went to taxes – COE, additional registration fee and excise duty – and “all used for the common good like building schools, shoring up defence and security, and meeting growing health-care needs”.

At first glance, that seems like a huge amount of good coming from the COE system. But the generous statement is misleading. Tan uses the following figures to arrive at the S$7 billion total: 82,000 cars sold last year, multiplied by S$85,000 per car. If we use an average rate of S$23,000 per COE, the 82,000 COEs alone contributed “only” about S$1.886 billion to the government coffers. (For those who are numerically challenged, S$1.886 billion is S$1,886,000,000.) This doesn’t sound as much as two-thirds of S$7 billion, but it’s still a humongous sum.

If indeed all of that (whether S$1.886 billion or two-thirds of S$7 billion) are used for the common good, why is the government constantly complaining that our public transport operators are not making enough money to sustain their operations?

It just goes to show that if shit could be sold, the government would tax your asshole.

Shame on the Straits Times for publishing such a piece of drivel.

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