Singapore is doing it because the alternative would be to use much more of their tiny island for car-related infrastructure. The total cost of that infrastructure would be much higher than what the sum of the COE's[1] would cost.

Are you sure Singapore is artificially inflating the cost, or that where you live isn't artificially subsidizing the cost of car ownership?

1. https://en.wikipedia.org/wiki/Certificate_of_Entitlement#His...