Elasticity towards road charges : Singapore-Malaysia

Abstract

The Malaysian government has recently introduced a new charge called the Vehicle Entry Permit (VEP), which applies to foreign-registered vehicles, starting with Singaporean cars. This action has resulted in discontent from the Singaporean government, who considers it discriminatory towards Singaporean-registered vehicles. Consequently, Singapore has responded to the announcement of Malaysia's plan to implement the road charge-VEP on August 1st, 2014, by taking drastic measures such as increasing the VEP fee, imposing toll charges, and instituting a reciprocal charge that will only be lifted if Malaysia implements a VEP for foreign vehicles entering Malaysia. This study aims to analyze the potential impact of Malaysia's Road Charge policy on travel demand, specifically focusing on Singaporean drivers crossing the border. The objective is to determine the degree of response by Singaporean drivers to the road charge and understand its possible repercussions on Malaysia's tourism and commerce. In order to achieve this goal, the study examines related literature on the Vehicle Entry Permit (VEP), toll prices, and travel behaviour, including the concept of price elasticity of demand. The study utilizes secondary data and employs an elasticity model to calculate the elasticity of travel demand. The Mann Whitney and Independent T-Test will be utilized to establish the difference in the number of entries after the implementation of the Road Charge. The study's findings indicate that the demand for private cars decreased by 44.66% from the beginning to the end of November 2016, and there was a sharp decline in demand even during the festive season. The researcher also determines that the demand for travellers is relatively elastic with a value of -0.108. This study's results will provide policymakers with insight into the possible negative impacts of such policies and how to mitigate them on tourism and commerce, particularly for stakeholders with lower incomes and the environment.