No, this is not a dissenting opinion on service contracting as proposed by a coalition of transport advocates. Rather, I write about other options or alternatives that can be taken on by the government in collaboration with the different sectors or players involved in transportation. Other options have not been discusses as extensively as would have been desired and ultimately weighed for application.
Allow me to rattle off a few options stated in the position paper by the Transportation Science Society of the Philippines (TSSP):
- Service contracting – which some groups have proposed and lobbied Congress for Php110 billion funding. This implies a government selecting a few among hundreds of bus operators and thousands of jeepney operators – a process that is bound to be controversial; whilst needing the mobilization of a performance audit and monitoring unit in a government agency. Economic literature is replete with studies that subsidy to producer (i.e., operator) produce bad outcomes over direct subsidy to consumers (i.e., commuter). In this regime, financial risks are borne by the government or authority.
- Fuel subsidy – the government was already implementing the Pantawid Pasada Program before ECQ. It incurred Php2.372 billion subsidies in 2019, up by 243% from Php0.977 billion in 2018. At the pump, the fuel subsidy equates to Php1.00/liter discount. Now, the DoTr is proposing a 30% subsidy which it estimates to be Php1,152/PUB and Php366/PUJ. These amounts are NOT commensurate to the theoretical drop in revenues at 50% load limit. Worse, free fuel leads to bad outcomes, as it would encourage higher fuel use and siphoning off to other modes.
- Free Fare – this proposal is intertwined with the service contracting model and may be counterproductive to the objective of social distancing. It is a policy that encourages unnecessary travel and crowding – which the distancing rule seeks to minimize. The government needs only to look on ridership on LRT/MRT on free-fare days against regular working days.
- Direct Subsidy to Commuter – in this scheme, the operator is allowed to increase its tariff by an amount sufficient to compensate for the 50% volume cut. However, the passenger only pays the same fare level that he paid before ECQ. The government pays the difference. When paired with the Automated Fare Collection System (which LTFRB has required under MC-2020-019 dated 14-May 2020), it is the most efficient method, and is immediately implementable. Subsidy is targeted, rather than all-encompassing. It promotes the wider adoption of AFCS on all public transport, not just on MRT/LRT. Senate Bill No.1417 seeks to fund, among others, for transportation vouchers; this could be disbursed rapidly via the AFCS card
Another idea is the purchase of new model jitneys to replace old jeepneys – this is an idea that I have posted and have discussed with former and current officials of the DOTC/DOTr before (matagal na itong idea na ito). You purchase say 1 modern jitney at 1.6million pesos/vehicle (note: other models are more expensive, exceeding 2M per unit) and replace the old, conventional jeepneys. It will not be free but payment for the vehicle will be deferred until after the transport crisis brought about by the pandemic clears out. The old jeepneys would be part of the collateral and perhaps still have some utility in them to be used for other purposes (freight?). Think about it. How much pork does your typical congressman and senator have? They could probably use this to modernize public transport in their respective constituencies!
It is important to have a lot of ideas out there instead of just one that is being pushed as the only option. In truth, there should be a combinations of solutions as there will not a be single one applicable and effective to all cases and situations. At this time, I am not sure that these options are being considered by the DOTr. The agency and the LTFRB are proceeding with rationalization and modernization simultaneously, at their own pace and at their own terms, taking advantage of the conditions and situations brought about by the pandemic. While it seems to be the ‘perfect’ opportunity to do rationalization and modernization, it might be immoral and inappropriate given the circumstances that doomed a lot of families who depend on public transport operations for their livelihood.