MOS Lee Yi Shyan's oral reply to Parliament Questions on Business Cost

Question No. 657 of Notice Paper No. 269 of 2010

Name and Constituency of Member of Parliament
Mr Arthur Fong, Member for West Coast GRC

Question
To ask the Minister for Trade and Industry what will be the impact on unit business cost in Singapore as a result of the rising cost of Certificates of Entitlement in recent times.

Answer
Mr Speaker, Sir, the recent increase in Certificates of Entitlement (COE) premium has had only a limited impact on overall business costs in Singapore.

First, land transport costs account for less than 1.5% of unit business cost for manufacturing companies in Singapore. The larger cost components for the sector are labor, utilities, trading, financial and IT services costs, and these would have a more significant impact on business costs.

Second, higher COE premiums will only affect firms which need new motor vehicles. As this represents a small percentage of the total existing population of vehicles for business use, the immediate impact of higher COE prices on business cost is small. However, should COE prices remain high over a longer period of time, there would be greater impact on business cost as older COEs expire and are replaced with more costly COEs.

While the impact on overall business costs is small, higher COE premiums will have a larger effect on those firms, for which transport costs are a larger component of their total costs. This includes companies which rely on courier and land transport services to deliver their goods and services. The Government will continue to monitor business costs, with a view to identifying potential pressures early and taking the necessary measures to manage them.