Economics of Land Transport in Singapore - Managing Traffic Congestion in Singapore

Summary

The video explores how Singapore manages traffic congestion in a land-scarce environment. With 12% of its land taken up by roads and a growing number of vehicles, the government uses measures like taxes, the Additional Registration Fee (ARF), and the Vehicle Quota System (VQS) to regulate car ownership. However, car usage, not ownership, is the core issue. To address this, Singapore introduced the Electronic Road Pricing (ERP) system, a targeted, pay-as-you-drive approach that charges motorists based on road usage. Coupled with a robust public transport system, these strategies help reduce congestion and ensure smoother traffic flow.

Takeaways

• 🚦 Singapore has a limited land area, with 12% taken up by roads, totaling over 3,300 kilometers.
• 🚗 The number of vehicles on Singapore's roads exceeds 900,000 and continues to rise.
• 🌐 The increasing demand for road space leads to traffic congestion, causing negative externalities such as increased travel time and reduced productivity.
• 💸 Congestion leads to higher business costs, increased fuel consumption, and environmental issues like noise and air pollution.
• 💵 The Additional Registration Fee (ARF) was introduced to make car ownership less attractive by increasing upfront costs.
• 🚫 The Vehicle Quota System (VQS) was implemented to control the growth of the vehicle population by capping the number of new cars each month.
• 🛂 The Certificate of Entitlement (COE) is required for purchasing a car under the VQS, and its price is determined by market demand.
• 🚦 The Area Licensing Scheme (ALS) was the world's first road pricing scheme, requiring drivers to display a paper license to enter restricted zones.
• 💳 The Electronic Road Pricing (ERP) system was introduced to manage traffic flow by charging motorists based on time, location, and traffic conditions.
• 🚍 The ERP system encourages drivers to adjust their driving behavior, such as taking alternative routes or using public transport, to avoid congestion charges.
• 🌿 An efficient public transport system is crucial as an alternative to private car usage to ensure the success of traffic control policies.

Q & A

What percentage of Singapore's land area is taken up by roads?

Up to 12% of Singapore's land area is taken up by roads.

How many kilometers of roads are there in Singapore?

There are over 3,300 kilometers of roads in Singapore.

What is the total number of vehicles on Singapore's roads?

There are over 900,000 vehicles on Singapore's roads, and this number is rising.

What is a negative externality in the context of traffic congestion?

A negative externality is the adverse effect or cost on third parties who are not directly involved in the activity that causes the effect, such as longer traveling times and disruption to planned activities due to traffic congestion.

How does traffic congestion affect individuals and businesses?

Traffic congestion leads to longer traveling times, disruption of planned activities, reduced productivity, increased business costs, higher fuel costs, and negative environmental impacts such as noise and air pollution.

What is the Additional Registration Fee (ARF) and how does it affect car ownership in Singapore?

The ARF is a fee based on a percentage of a car's open market value, payable upon the registration of a vehicle. It increases the cost of car ownership, making cars less attractive to consumers.

What is the Vehicle Quota System (VQS) and how does it control the number of new cars on the road?

The VQS is a quota system that caps the number of new cars added to roads each month. Buyers must bid and pay for a Certificate of Entitlement (COE) before purchasing a car, and the number of COEs available is limited by the quota.

How does the Certificate of Entitlement (COE) work in the context of the Vehicle Quota System?

The COE gives the right to purchase a car, and without it, one cannot own a car. The price of the COE depends on demand, and it allows for control over the growth of the total vehicle population.

What is the Area Licensing Scheme (ALS) and how does it manage traffic flow?

The ALS is a road pricing scheme that requires drivers to display a paper license to enter a restricted zone. It was the world's first road pricing scheme and aimed to manage traffic flow by discouraging driving in certain areas.

What is the Electronic Road Pricing (ERP) system and how does it differ from the ALS?

The ERP system is an automated electronic road pricing system that charges motorists every time they drive on a priced road. It is more versatile than the ALS, with charges varying according to time, location, and traffic flow, and it encourages drivers to adjust their driving behavior.

How does the ERP system influence driving behavior and traffic flow?

The ERP system encourages drivers to consider driving at non-peak hours, take alternative routes, switch to public transport, or even forgo the trip. It charges drivers based on the external costs they impose on others, leading to a more efficient market outcome with less car usage and smoother traffic flow.

Why is it important to have alternative modes of transport when discouraging car ownership and usage?

Having alternative modes of transport is essential to ensure that people have viable substitutes to switch to, which is necessary for the effectiveness of traffic control policies. An efficient and effective public transport system serves as a major pull factor, convincing people that they are making the right choice.

Outlines

00:00

🚗 Road Congestion: A Growing Challenge in Singapore

The introduction highlights that 12% of Singapore's land area is dedicated to roads, equating to over 3,300 kilometers of road space. Despite the vast network, the increasing number of vehicles—exceeding 900,000—has resulted in challenges like congestion. As road expansion is limited by space, the focus shifts to finding ways to efficiently allocate road space to avoid traffic gridlock. The concept of negative externalities is introduced, using the example of Sean being late for a date due to congestion, negatively impacting his girlfriend Cindy. Congestion not only disrupts personal plans but also results in economic inefficiencies, increased business costs, fuel wastage, pollution, and an overall reduction in living standards.

05:02

🏷️ Car Ownership and Control Measures

To mitigate road congestion, Singapore has employed measures to reduce car ownership. The Additional Registration Fee (ARF) was introduced in the 1970s, based on the open market value of cars, to make ownership less attractive. While this did lead to some reduction in demand, rising affluence caused the demand for cars to persist, as buyers began substituting high-end cars with cheaper models. To further control vehicle population growth, the Vehicle Quota System (VQS) was introduced in 1990, requiring buyers to bid for Certificates of Entitlement (COEs), which are limited in number. This measure allowed for direct control over the growth of vehicle numbers on the roads.

10:14

🚦 Managing Car Usage: Road Pricing and ERP System

Car ownership alone isn't the root of congestion—it's car usage that directly impacts traffic flow. In 1975, Singapore introduced the world's first road pricing scheme, the Area Licensing Scheme (ALS), to charge motorists for entering congested zones. This system evolved into the Electronic Road Pricing (ERP) system in 1998, which automatically charges vehicles based on the time, location, and traffic conditions of their routes. By increasing the marginal cost of using roads, ERP effectively reduces road usage during peak hours, encouraging drivers to alter their behavior. The ERP system is a more precise tool than car ownership measures, functioning on a pay-as-you-use basis, and is effective in managing road congestion.

🚌 The Importance of Public Transport as a Traffic Solution

For Singapore’s traffic management strategies to work, it is essential to provide viable alternatives to driving. Measures like the VQS and ERP push drivers away from car usage, but the availability of a high-quality, affordable, and efficient public transport system acts as a pull factor, convincing people to shift away from personal car use. The final section emphasizes that improving public transport is key to achieving smooth traffic flow, helping to balance the demand for road space and enhancing overall traffic management efforts.

🎶 Closing Thoughts

This paragraph appears to be a placeholder or a conclusion, accompanied by music. It serves as the ending of the video, prompting viewers to reflect on the content and the issues discussed in the script, particularly the effectiveness of Singapore's road congestion management strategies.

Keywords

💡Negative Externality

A negative externality refers to an adverse effect or cost imposed on third parties who are not directly involved in an activity. In the context of the video, traffic congestion is highlighted as a negative externality. It not only affects the drivers stuck in traffic but also causes delays, higher business costs, and environmental pollution, which impact the economy and society at large.

💡Traffic Congestion

Traffic congestion is the overcrowding of roadways due to the high number of vehicles, which leads to slower travel times and increased pollution. In the video, Singapore's traffic congestion problem is linked to limited road space and increasing demand from car owners. It affects productivity, business costs, and overall quality of life for residents.

💡Vehicle Quota System (VQS)

The Vehicle Quota System (VQS) is a policy introduced in Singapore in 1990 to regulate the number of new cars on the road. Buyers must bid for a Certificate of Entitlement (COE) before purchasing a car. This system allows the government to control vehicle population growth, addressing the issue of traffic congestion by limiting the number of new vehicles added to the road each month.

💡Certificate of Entitlement (COE)

The Certificate of Entitlement (COE) is a bidding-based permit that grants Singapore residents the right to own a car. The number of COEs is limited by the Vehicle Quota System (VQS), and the price of a COE is determined by demand. COE ensures controlled growth of vehicle numbers, directly affecting car ownership and congestion on the roads.

💡Electronic Road Pricing (ERP)

The Electronic Road Pricing (ERP) system is a road-use charging scheme in Singapore that adjusts fees based on traffic conditions, location, and time of day. Introduced in 1998, it encourages motorists to avoid peak-hour travel or congested routes. By charging drivers each time they use certain roads, ERP helps to internalize the external costs of congestion and promote efficient road use.

💡Area Licensing Scheme (ALS)

The Area Licensing Scheme (ALS) was Singapore’s first road pricing mechanism, introduced in 1975. Under ALS, drivers had to display a paper license to enter restricted zones. Although manual, it was a pioneering approach to managing traffic congestion. The system was later replaced by the more advanced Electronic Road Pricing (ERP) system.

💡Additional Registration Fee (ARF)

The Additional Registration Fee (ARF) is a tax in Singapore that is calculated as a percentage of a vehicle's Open Market Value (OMV). Introduced in the 1970s, it was designed to make car ownership less attractive by increasing the cost. However, with growing affluence, the demand for cars continued to rise despite this fee.

💡Marginal Private Cost (MPC)

Marginal Private Cost (MPC) refers to the cost incurred by individuals (e.g., drivers) for an additional unit of activity (e.g., driving). In the video, the ERP system increases drivers' MPC by imposing road charges, which reduces unnecessary driving and helps achieve a more socially optimal level of car usage, mitigating congestion.

💡Public Transport System

The public transport system in Singapore is emphasized as a key 'pull factor' in addressing traffic congestion. The video underscores the importance of having an efficient, attractive, and affordable public transport system to provide commuters with viable alternatives to driving, thereby reducing reliance on private cars and easing road congestion.

💡Road Space Scarcity

Road space scarcity refers to the limited availability of land for road expansion in Singapore due to its small size and high population density. As car ownership and usage increase, the video highlights that Singapore cannot continue to expand its road network indefinitely, necessitating alternative solutions like road pricing and vehicle quotas to manage congestion.

Highlights

Up to 12% of Singapore's land area is taken up by roads, totaling over 3,300 kilometers of asphalt and concrete.

The total number of vehicles in Singapore is over 900,000, with demand continuing to rise despite limited road space.

Traffic congestion creates negative externalities, such as longer travel times, reduced productivity, and higher business costs.

Congestion affects not just drivers but also third parties, increasing costs for businesses and contributing to air and noise pollution.

Fuel costs rise as vehicles remain idle in traffic jams, contributing to inefficient fuel use and environmental harm.

To address congestion, Singapore introduced the Additional Registration Fee (ARF) in the 1970s to make car ownership less attractive by increasing its cost.

The Vehicle Quota System (VQS) was introduced in 1990 to control car population growth by limiting the number of new cars added to roads each month.

The Certificate of Entitlement (COE) system regulates the number of vehicles by requiring buyers to bid for the right to purchase a car.

Although ARF and VQS control car ownership, they do not directly address car usage, which is the main contributor to congestion.

In 1975, Singapore introduced the Area Licensing Scheme (ALS), the world's first road pricing system, to manage traffic in congested areas.

The Electronic Road Pricing (ERP) system was introduced in 1998 to automate road pricing, charging motorists based on the time, location, and traffic flow.

ERP encourages drivers to avoid congested roads by either driving during non-peak hours, taking alternative routes, or using public transport.

The ERP system internalizes the external costs of congestion, making drivers pay for the negative impact they create on other road users.

By charging more during high-traffic times, ERP shifts driving behavior and reduces congestion to a socially optimal level.

While ARF and VQS act as blunt tools to discourage car ownership, ERP is a more precise method to reduce car usage and manage traffic flow effectively.

For traffic control measures to work, Singapore must continue to invest in and improve its public transport system, providing people with viable alternatives to driving.

Transcripts

[Music]

did you know up to 12% of Singapore's

land area is taken up by roads

that's over 3,300 kilometers worth of

asphalt concrete total number of

vehicles and our roads over 900,000 at

rising even as we find ways to optimize

our land use in terms of Road planning

we cannot expand our road networks

indefinitely this is a situation of

scarcity limited space for roads but

ever increasing demand from motorists

wishing to drive their cars on the roads

so how does Singapore ensure the traffic

doesn't grind to a halt how do we

efficiently allocate a scarce resource

which is road space traffic congestion

imposes negative externalities on many

parties not just drivers stuck in a jam

if you recall a negative externality is

the adverse affect or the cost on third

parties who are not directly involved in

the activity that causes this effect

what do we mean let's say sean is on his

way to meet his girlfriend Cindy for a

date he considers his private costs and

benefits from driving to meet his date

now imagine many more drivers making

such decisions at the same time on route

Sean gets stuck in traffic as a result

he arrives an hour late now this puts

Cindy in a terrible mood for the rest of

the date

as you can see congestion is a negative

externality which causes problems such

as longer traveling time and disruption

to planned activities for all the time

last in congestion leads to less time

for family and leisure and lower

productivity as workers arrive late in

the office business costs will increase

for instance delivery companies will

require more resources because of the

longer time needed for deliveries

furthermore as congestion slows the

movement of goods and services it adds

to the price of products and reduces the

competitiveness of businesses in

addition fuel costs will also increase

as car engines continue to run while

cars are at a standstill and this

results in engines being used

inefficiently congestion also causes

noise and air pollution and ultimately

congestion causes detrimental effect on

the productivity for the whole economy

everyone loses from a lower standard of

living mitigation of congestion requires

that both the supply and demand sides of

the problem be addressed one way of

managing traffic congestion is by making

car ownership less attractive how with

taxes and other upfront costs like the

additional registration fee or a RF

introduced in the 1970s the a RF is a

fee based on a percentage of a car's

open market value it is payable upon the

registration of a vehicle in other words

it puts an additional cost to owning a

car with the higher prices of cars that

consumers had to pay cars became less

attractive the introduction of a RF

results in a higher cost of car

ownership which subsequently shifted the

supply curve for cars leftwards with a

given demand curve there should be a

fall in the number of cars demanded

unfortunately while it had some effect

it was not all that effective

why with growing affluence in Singapore

the demand for cars has increased

shifting the demand curve for cars to

the right also what happened was that

people started substituting the high-end

cars with cheaper models to offset the

higher taxes so the car population

continued to grow faster than desirable

and traffic conditions worsened another

measure was introduced to manage the car

population to ensure that it grew at a

desired and sustainable rate enter the

vehicle quota system or vqs introduced

in 1990 the vqs is a quota system that

puts a cap on the number of new cars

added to roads each month

under the system buyers have to bid and

pay for a certificate of entitlement or

Co II before purchasing a car the number

of co es available is limited by the

allowable quota hence the system allows

complete control over the growth of the

total vehicle population the co e gives

the right to purchase a car no co e

means no car a fixed quantity of CO e is

shown by a vertical supply curve the

price of co e will depend on the demand

the higher the demand for Co YZ the

higher will be its price ceteris paribus

with a limit on the number of cars that

can be registered each year through the

quota system it is much easier to

control car population growth

effectively but AR f & vq s are only

ownership measures congestion is not a

direct product of car ownership but

rather car usage taxes and quotas are

blunt tools as they target all vehicle

owners regardless of the distance and

time they actually spend on the roads

with high sunk costs to own a car

drivers are likely to drive more to

maximize their investment as the

marginal cost of car usage is

comparatively long to address burgeoning

traffic in the city area the government

introduced the area licensing scheme in

1975 the world's first road pricing

scheme

[Music]

the ALS was a manual system drivers had

to display a paper license on their

windscreen to enter the restricted zone

in 1998 the Land Transport Authority

improved the road pricing scheme by

introducing the automated electronic

road pricing or ERP system ERP charges

motorists every time they drive on a

priced road the erp charge is deducted

from a stored value card inserted into

an in vehicle unit erp system is a

versatile charging system to manage

traffic flow charges vary according to

time location and traffic flow erp

encourages motorists to consider driving

at non-p cars take an alternative route

switch to public transport or even do

away with the trip completely erp

charges are designed so that the drivers

internalize the external costs they

impose on third parties and pay for the

negative externality each time they use

a congested road with the erp charges

drivers face a higher marginal private

cost - than before resulting in a

leftward shift of the MPC curve an erp

charge of a B will reduce the number of

trips from q1 to q2 which is the

socially optimal level if the erp

charges correctly reflect the external

costs imposed on others the drivers cost

of driving will be sufficiently raised

to result in a more efficient market

outcome with less car usage and smoother

traffic flow so the ERP is a more

targeted approach to change the driving

behavior of existing drivers it is based

on a pay as you use principle the more

you drive on congested roads the more

you pay also it's effective because it

gives LTA the flexibility to target

specific roads areas or specific time

if you imagine the a RF and vqs as blunt

weapons in Singapore's fight against

congestion then the ERP is the fine

chisel used to sharpen LTS efforts when

used together we can better achieve the

desired outcome of smooth flowing

traffic when discouraging car ownership

and usage it is essential to ensure that

alternative modes of transport are in

place so that people have substitutes to

switch to having adequate viable and

close substitutes is essential for the

effectiveness of traffic control

policies that is why it is also equally

important for us to continually improve

and create a good-quality attractive and

affordable public transport system if

you think of the vqs and ERPs push

factors to move people away from driving

then an efficient and effective public

transport system is the major pull

factor to convince them that they are

making the right choice now that we have

a better understanding of how traffic

congestion is managed let us ponder

these questions

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you

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