Topic Area: Air Pollution/Transportation
Geographic Area: Singapore
Focal Question: Can Singapore's Area Licensing scheme effectively reduce traffic congestion during the peak hours of traffic flow?
(1) McCarthy, Patrick; Tay, Richard. "Economic Efficiency vs. Traffic Restraint: A Note on Singapore's Area License Scheme." Journal of Urban Economics. 34 (1) pp. 96-100.
(2) Toh, Rex. "Experimental Measures to Curb Road Congestion in Singapore: Pricing and Quotas." Logistics and Transportation Review. 28(3) 1992. pp. 289- 312.
(3) Toh, Rex. "Road Congestion Pricing: The Singapore Experience." Malayan Economic Review. 22(2) Oct. 1977. pp. 52-61.
Reviewer: Kristen M. Zolla, Colby College '96

Singapore, a small city state experiencing rapid industrial growth, found itself faced with the new problem of urban traffic congestion in the seventies. A large population with a strong preference for automobiles, coupled with a concentration of most of the economic industries into the small land area of the central business district led to severe traffic conditions including congestion, reduced traffic speeds, and environmental problems. These problems clearly had to be dealt with.

Each automobile user causes externalities which impose unfavorable conditions on others. Since roads are built to accommodate a certain capacity of people, after that level is reached, each additional vehicle slows down the other cars on the road thus imposing a longer traveling time of all of the other drivers. Furthermore, automobiles produce air pollution, which is another eternality which affects the population of Singapore (Toh,77 52).

To help alleviate this growing problem, the Singapore government took a four pronged approach to attempt to lessen the problem. Firstly, a curbing of car ownership was dealt with by increasing the purchase and ownership costs of motor vehicles through tariffs. Secondly, steps were taken to improve public transportation in an effort to encourage its use. Also an attempt to improve the management of the Singapore's roads was made in an effort to make them more conducive to accommodating traffic. Finally, on June 2, 1975 an area licensing scheme(ALS) was enacted (Toh, 77 52).

This area licensing scheme defines a restricted zone in the central business district containing a land area of 5.59 square kilometers. This scheme restricts use of the roads in the central business district (CBD) during the hours of 7:30 to 9:30 (changed to 10:15 on Aug. 1). Only cars which display a license are allowed to enter this zone through one of the 22 vehicular entry points. This license can be purchased on a daily basis for S$3 or on a monthly basis for S$60. (This fee was changed in December of the same year to S$4 for a daily license and S$80 for a monthly license.) Company cars were charged twice the residential rate for a license, while busses, service and military vehicles, carpools (with four or more people) and taxis were all exempt and could move freely within the CBD without a license (Toh, 77 53).

This regulation was the first of its kind anywhere in the world. It was hoped that this ordinance would give car owners an economic incentive to reduce the use of roads in the CBD and curtail peak hour traffic by 25 to 30%. Additionally, the reductions as a result of the restrictions in the morning hours were expected to lead to a "mirror image" reduction in the evening return hours, as people were expected to take alternative means to work and then return the same way (Toh, 77 54).

The Area Licensing Scheme was extremely successful in reducing traffic congestion during the peak hours. By the fourth week of the ALS, traffic flow during the peak hours had fallen by 45.3%, this included an astonishing 76.2% reduction in the number of cars in the CBD. It was found that during the restricted hours in response to the ALS, carpools increased their market share by 96.9% by increasing from 12.7% of the vehicles to 30.2%. Additionally, some of the commuters switched to public transportation and the percentage of commuters traveling by bus increased from 35.9% to 43.9%. However, not all of this reduction is due to a decrease in the number of individuals driving their cars. It was found that many people shifted their travel times within the restricted area to just before and after the restricted hours. Additionally new "escape corridors" around the CBD experienced increasing traffic as commuters avoided the CBD and took alternate routes. Originally, part of the reduction in private vehicular use was offset by an increase in the use of taxi's within the CBD. Shortly after the enactment of the ALS (June 22), taxis were taken off the exempt list and the presence of taxis then fell to below the pre-ALS level. Finally, it was determined that the "mirror image" hoped for did not occur and those commuters that altered their morning commute hours or route did not do so on their return trip. Also, to deal with the "escape corridor" situation, traffic lights were reset to accommodate the increased traffic flow (Toh, 77 54).

In 1989, in effort to strengthen the results of the ALS, the Singaporian government modified the program. The restricted hours were lengthened to include the afternoon rush hours of 4:30 to 7:00 (later shortened to 6:30). Furthermore, car pools, private and school busses, commercial vehicles, and motorcycles were taken off the exempt list (Toh, 92 298).

The short term results of the ALS have been found to have been sustained. This program has been traditionally credited with decreasing traffic flow in the CBD during the peak hours by 50% since its implementation.

The ALS has experienced both praise as an innovative means for a much needed successful decrease of traffic flow in the CBD and some criticism by those who think that this regulation goes to far. This regulation uses economic incentives in an attempt to allow car users to internalize the social costs that they impose when they use their vehicle. Although, the increased travel time of other commuters is the eternality which most of the literature stresses, it is important to note that car use also imposes environmental costs. Questions have been raised about whether or not the license fee is a good representative of these externalities. In 1990 a study by the Public Works Department in Singapore found that in fact the average speed in the restricted zone during the peak period was faster than during the non peak periods (McCarthy 98). Since one would believe that there would be an incentive to travel during the peak periods, it has been argued that the efficient outcome would have a greater number of cars traveling at that time than at other times (McCarthy 98).

The Singapore Area License Scheme has without a doubt been extremely successful in curbing traffic during the peak hours of travel. While both carpooling and use of busses increased since the regulation there have been some negative side effects. These include increased traffic flow before and after the restricted hours and increased travel around the restricted area. However, most believe these to be a small price to pay for the improved conditions and the prevailing question is if the prices for the licenses are too high and the roads are now economically underutilized.

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