Singapore and Malaysia’s toll hike showdown to drive domestic inflation in 2014

The two-way toll will increase more than fivefold.

Lower transport costs drove Singapore’s Consumer Price Index (CPI) down in August, but Maybank Kim Eng warns that transport costs continue to be volatile and are likely to climb given Singapore’s toll hike showdown with neighbor Malaysia.

The game of tolls started when Singapore’s Vehicle Entry Permit (VEP) and Goods Vehicle Permit (GVP) fees went up by 75% and 300% respectively on the first of August this year. 

Following this, Malaysian authorities also began charging higher toll in August, involving a more than fivefold increase from te current MYR 2.90 to MYR 9.70 for cars entering Malaysia from Singapore. Cars leaving Malaysia were also levied with a new charge of MYR 6.80. 

The Land Transport Authority responded by revealing new toll rates for motorists entering and leaving the island, which will be effective starting October 1. The two-way toll for a car will jumo to $6.5 from the current $1.20, while light vehicles will be charged $9.80 and heavy vehicles $13.

“We reckon the series of upward revision transport charges should have an impact on transport costs in the CPI index and eventually feed through into other CPI components,” stated Maybank Kim Eng’s report.