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Fare hikes – MRT3

September 2010
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I was at a meeting this morning at the Department of Transportation and Communications (DOTC) when we heard what seemed like a rally in front of the building. The rallyists  claimed and appeared to be students though it was really difficult to determine based on our view from the 16th floor. The issue of the rally was the impending increase in the fares for the EDSA Mass Rapid Transit (MRT-3). The rallyists proclaimed their opposition to such an increase and laid out their reasons while calling for the DOTC to cease and desist from the fare hike.

Their arguments are designed to appeal to the masses, particularly those who have a basic understanding of what it takes to provide infrastructure such as the MRT. I say basic here because they get information from common sources such as popular TV, radio and newspapers (most probably tabloids rather than the dailies). In most cases, the kinds of information are likely commentaries by opinion writers or even opinionated  (but not necessarily knowledgeable and fair) personalities. Some of these may actually be misleading people regarding the circumstances leading to and surrounding the government’s intervention on MRT, particularly its take-over of a losing venture from a failed consortium.

One of those who were at the meeting with me joked that he be allowed to come down and face the rallyists. His argument against theirs will be based on the inconvenient truth that the main (and perhaps strongest) justification for the fare increase is that the government can no longer sustain its huge subsidies for the payments for the loans that covered the construction of the system. These subsidies are drawn from the national treasury, which in turn is derived from the taxes that we pay from our hard earned income.

However, the tax-base is the entire country (i.e., all taxpayers) and not just from Metro Manila and its adjacent areas. The latter area represents what could probably be assumed as the region that benefits the most from the operation of EDSA-MRT. Thus, it is safe to say that taxpayers in major cities like Cebu and Davao do not derive much, if any, benefit from the MRT. This last statement is an argument that is always challenged by those who prefer to imagine that the rest of the country actually benefits (indirectly?) from the operation of MRT, notwithstanding that the country is an archipelago and that the interconnections of these islands are unlike those in developed archipelagoes like Japan and the UK. But even for these countries it would be very difficult to attribute say Osaka’s development to the operation of Tokyo’s Yamanote Line. In numerical terms, why should 30 million taxpayers pay for something that effectively benefits about 3 million taxpayers? Note, too, that many people residing in Metro Manila aren’t paying taxes. Perhaps an eminent economist or two can shed light on this.

For sure, there are a lot of issues concerning the EDA-MRT. It has been hounded by controversies even during its planning when the flavor of the season was public-private partnership (PPP) in the form of BOTs. Incidentally, the current government has stated that it is encouraging PPP for the development of big ticket infrastructure projects. I just hope that the government has learned its lessons and can forge contracts that are advantageous to us taxpayers who will effectively be paying for the costs of development. And perhaps, I dare say, these projects will be in other regions where cities are rapidly developing without the benefit of much needed transport infrastructure.


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