No Free Lunches, No Free Roads

We get the kind of transport system we pay for – so what are we paying for?

With what seems to be ever-worsening traffic in the Philippines, many speak of the need to invest more in our transportation system. Indeed, the mantra of the government has been to “build, build, build!” And what should we build? Everything in sight, it seems. More roads, more trains, more of everything – it doesn’t matter what we build, as long as we build more of it. But before we visualize the transport system of the future, let’s look at how we invest in the transport system of today:Who pays for Roads1

I’ll explain the chart here. Warning – my calculations are very quick and very dirty:

First, I looked up some reported figures from the national budget that correspond to spending on roads. This only covers road spending in the national budget, so whatever is spent for by local governments will bring the figure higher. It is not clear if this budget covers construction of new roads only or if it also covers maintenance of existing roads – if either activity is not accounted for in these budget items, the figure will be higher.

Next, I looked up what our collection figures looked like for Petroleum Excise and Motor Vehicles’ Tax, which most closely correspond to “user fees” for driving on roads. For Petroleum Excise, the BIR so far only has disaggregated data available for Jan-Sep 2016, so I arrived at an annualized estimate by assuming (maybe wrongly) that the last quarter of the year would be similar to the average of the first three.

To get 2017 estimates for all figures, I assumed growth of 6.6%, which corresponds to the Philippines’ GDP growth in Q4 2016. Summing everything up, the government spends at least P182 billion more on roads than it gets from Petroleum Excise and Motor Vehicle’s Tax.

It’s clear here that the government spends much more on roads than it gets back from the revenues we can class as “user fees.” Road user costs are effectively subsidized by the revenue generated by the rest of the country’s economic activity. Meanwhile, road use – primarily in the form of driving – directly contributes to external costs faced by all of society, even non-drivers. More driving leads to more pollution; worsened safety conditions; and most visibly, congestion that drains economic value from all other activities and inhabitants in a city.

While some will argue that these roads generate so much wealth that they pay for their own construction and operation costs plus all external costs, that higher-order income argument is indirect, and requires a good deal of quantitative chops to argue rigorously. Also, if that were the case, that would be a very strong argument for all roads to be tolled (more on this in a bit) because if they indeed generate all that wealth, people should be happy to pay for them directly.

On the other hand, here is what the National Government provides to public transport in the budget:Public Transport Subsidy

For this table, I looked up the official subsidy to the Light Rail Transit Authority (LRTA) and Philippine National Railways (PNR) on the Bureau of Treasury Website. These are the Government Owned and Controlled Corporations (GOCCs) that operate passenger rail in the Philippines. MRT3’s website quoted Capital and Operating outlays in the National Budget at a total of P5.8 billion. This gives us a total budgeted subsidy to our rail projects of P8.25 billion. No budget is laid out to subsidize the operations of the PUV sector, which includes jeepneys and buses. Neither is any subsidy listed for transport by tricycles or taxis.

Some would argue that there is more government support at work here – the National Government lends money to GOCCs, including LRTA and PNR, for them to pay outstanding obligations. LRTA and PNR’s payables to the National Government from advances are below:

 (in PhP billions) 2015 2014 change
LRTA Advances Payable 57.79 55.4 2.39
PNR Advances Payable 1.92 2.17 -0.25

One note about these advances is that they are carried on the books of the GOCCs as a liability. LRTA and PNR are expected to pay the national government back for these advances, and their management teams are incentivized to pay back advances faster and keep the balance from growing. This policy has led to cost-cutting with respect to service, as fare revenue that would otherwise go towards maintenance and capital investment must service debt. Meanwhile, there is no expectation, let alone obligation, that drivers will ever cover the costs of roads that have to be built.

While drivers (and non-drivers) pay taxes above drivers’ user fees for roads to be built, public transport riders do, too, yet they use far less road space, and cost much less in road depreciation and external costs than drivers do. It’s tempting to assume that people in cars, who are likely to be wealthier, pay more in taxes and thus justify the expenditure, but that argument requires making many (probably unrealistic) assumptions along the way.

The basis for public subsidy of economic activity is often the measurement of how much the activity benefits or harms society beyond the direct participants. In this framework we should subsidize activities that have external benefits and tax (or negatively subsidize) those that have external costs. What we do in reality is backwards – there is a huge subsidy from the public to drivers, and a comparative pittance to public transport.

Is there a better way to pay?

It’s often argued that a form of road pricing or congestion charging in Metro Manila will further burden the “overtaxed” middle class. This is only true in a very narrow sense. Road pricing shifts the burden from the general fund to the drivers who proportionately benefit more from roads. Not only that, road pricing actually reduces congestion unlike schemes like number coding, which give the illusion of reducing congestion but make traffic worse.

Let’s finish this off with UCLA’s great infographic on Road Pricing / Congestion Charging. This does a great job breaking down the fairness issue between different types of road funding:



Safety Second: The Value of Security Theater

Is it more important to feel safe than to actually be safe?

Every passenger on the MRT knows the drill – before you tap your card through the gate to the train platform, you play a part in an act of sorts. First, you fumble to unzip a pocket in your bag. A guard pokes around in it for a second or two, then you zip it up, tap your card, and head to the platform. During rush hours, it seems like hundreds of passengers are ahead of you going through these motions ever so slowly, with another hundred or two waiting behind to play their part. You may have walked through a metal detector that may or may not be working.

When you’re rushing to get to work or get home, the act of checking a pocket in every single passenger’s bag seems like a frustrating eternity. But it’s worth it for the safety of the system… right? Who knows how many threats have been foiled by a terrorist opening the exact pocket his bomb or weapon happened to be in?  Even if the extra waiting time gets tacked on to everyone’s commutes, people feel safer seeing the inspections, and are more likely to ride the MRT instead of congesting roads with their cars… right?

There is a wealth of evidence that measures like bag checks don’t make anyone safer. It’s pure security theater.

What is Security Theater? 

According to Bruce Schneier in his excellent essay, Moving Beyond Security Theater, the concept of security theater refers to “security measures that make people feel more secure without doing anything to actually improve their security.”

Schneier elaborates on the distinction:

Security is both a feeling and a reality. The propensity for security theater comes from the interplay between the public and its leaders. When people are scared, they need something done that will make them feel safe, even if it doesn’t truly make them safer. Politicians naturally want to do something in response to crisis, even if that something doesn’t make any sense.

Schneier himself points out that Security Theater is not always useless. In a TED talk, he describes the case of security bracelets in hospitals. These bracelets set off an alarm in case someone without an authorized bracelet takes a baby from its mother. Schneier points out that for all the times baby-snatching is used as a plot device in film and television, it almost never happens in real life. However, mothers normally become strongly attached to their newborn children in the time following childbirth for many reasons, one of which is the fear of baby-snatching. This makes it difficult for mothers to surrender children to hospital staff for routine procedures.  Even though baby snatching is unlikely, hospitals must persuade mothers who feel otherwise that it actually is unlikely. The bracelets are security theater. They help hospital staff do their job.

The duality is on display in this article by Stephen Hardy on Strong Towns. In his study of a few census tracts in Kansas City and Austin, Texas, peoples’ feelings of security in these areas do not correlate with crime rate, but with employment. This points to another insight in this case – actually making people more secure does not make them feel secure. More work has to be done to establish if employment actually is what drives the feeling of security, or if the feeling of security has another cause, but results in greater productivity and eventually higher employment. The important takeaway is this: you don’t always find the feeling and reality of security in the same place.

Security – both the reality and the feeling – have implications for urban and transport economic policy. Building security improvements into public transport also attracts people out of space-inefficient private transport. This draws traffic away from roads and decongests them, at least in the short term. People who do not feel safe taking public transport or biking  will be motivated to travel in the relative (perceived) safety of a private car. By making people feel safe (and hopefully actually making them safe), transit authorities can make mobility and access improvements without growing fleet or adding service-hours. Some measures that make people feel safer – like improving lighting at stops and stations – can be done at a much lower cost than, for instance, adding trains. Government transport policy should be mindful of these quick wins.

Here is an interesting question on this duality: can the feeling of security ever be worth more than the reality of security? Is it ever worth trading actual safety for the mere feeling of being safe? Back to the example above of the MRT bag check, the installation of the contactless Beep Card system is meant to move people faster by removing the technology bottleneck of the old gates. Tap cards allow for higher passenger flow (people moving per second) levels at the same densities (people per square meter) than the old technology. However, the additional bottleneck created by the bag check creates a lower-density location immediately behind the gates, wasting much of the time savings that the tap card technology brings. The passenger density, of course, backs up behind the bag checker, resulting in overall lower flow. In order for the bag check to be economically justifiable, the travel delay imposed by the bag check will have to be canceled out by some quantified value of “feeling more secure” from having the bag check there. Whether this is studied in the Philippines is anyone’s guess, since feasibility studies of government projects are not for public consumption.

Besides the bag check, the feeling of security is used to justify other policies* whose effect on the reality of security is not conclusive. Recalling Hardy’s study above, perhaps there is economic productivity associated with “peace of mind,” that may be great enough to warrant even eroding the reality of safety. If we live better in some regards when we feel safe – if we can work and study better, for instance – perhaps being a little less safe is something we can live with… right?

*I have not found the survey cited by NCRPO here on Pulse Asia’s website. As of this post’s writing, I have reached out to Pulse Asia via twitter on the matter but have received no response. The contact form on their website appears to be down. 

Are Open Feasibility Studies… Feasible?

Publishing feasibility studies is good for research and democracy. Why don’t we do it?

Anyone who has had to make an investment decision of any significance is familiar with the concept of the feasibility study: make sure that your decisions are made with due diligence and backed by the best available knowledge. Take a good, informed look before you leap, essentially.

The national government’s most important projects are reviewed by the Investment Coordination Committee (ICC), an inter-agency body composed of the government’s foremost experts on various aspects of policy. The ICC, too requires feasibility studies to be submitted as documentation for each project’s approval. However, the Philippine government, by default, does not release feasibility studies for its solicited projects.

When I was a student in the United Kingdom, I found it quite refreshing that the British Government had generally open access to feasibility studies and project cases. Take Britain’s premier high speed rail project, HS2, a project conceived to provide additional rail linkage between London and Northern England, as well as other connections in the North. The strategic case produced by the government is online and freely available for download.

The publication of the cases has enabled healthy public debate to take place prior to the project’s commencement, but has also allowed the public to engage with the project and make informed decisions in light of HS2. But the benefits are not limited to developers or citizens directly impacted by the project. Because anyone can download the studies, British students can engage deeply in current events that and ground principles they encounter in the classroom. The detailed work that students do with live data improves their prospects for employability. For students who cannot afford to produce their own research, open feasibility studies are a boon.

Why else is it beneficial that feasibility studies are published? If you have around seven or so minutes to spare, follow the link to Gil Meslin’s tweet thread below where he outlines a how a particular planning and project selection process became politicized:

The Gardiner East saga can be summarized like this: The city of Toronto retained a team of experts to help them make a decision about the Gardiner East expressway based on agreed-upon objectives. The objectives included not just improving mobility, but getting the best outcomes as far as safety, aesthetics, environmental and financial sustainability. The consultants recommended that the best option would be to remove the expressway, a move which has been amazing for cities that have tried it. However, right before city officials accepted the recommendation, a private party sent a letter to the city advocating against the expressway removal and proposing a “hybrid” solution that would keep the expressway. A new study was commissioned and used as basis to say that the removal of the expressway would create unacceptable delays, but Meslin noted that this study was not presented in full to the public and that the analysis by officials was incomplete.

The original consultant team was asked to consider the “hybrid” option that would keep the expressway and weigh it against the removal option. In the end, the city council of Toronto made a decision to keep the expressway in spite of expert advice saying it was the less preferred option on all fronts. Except, of course, for parties such as the one which intervened to propose that option.

Putting aside the awkwardness of Meslin’s medium, the point of his journalism is clear. Feasibility studies, done right, allow expert opinion to inform public policy. The studies also serve another purpose – they make it clear when official decisions happen in contrast to public opinion. When the process of approving the feasibility study is documented, the public can also see how officials’ thinking evolves in response to new information – such as the intervention of other interested parties, as in the case Meslin described. And if you’re a Torontonian that values officials that make decisions based on expert advice and evidence, this is valuable information for the next time you go to the polls.

Dear Government: Show Your Solutions

A few months ago, I put in a request for some information on traffic levels that I was told were contained in feasibility studies commissioned by the Department of Transportation. While my current request is being acted upon, I received an email update (maybe due to a bug) responding to someone else’s FOI request for a “Feasibility Study of the proposed BRT system.” The request probably refers to one or more studies of the planned Bus Rapid Transit systems in Metro Manila. The request was marked DENIED, with the DOTr’s legal department giving the following explanation:

“It bears to note that the purpose of his inquiry, while not per se contrary to law and existing rules and regulations, lacks specificity and clarity, and is speculative and conjectural, which the Department may not be able to answer with sufficient definiteness.

Anent the information requested, which is Feasibility Study of the proposed BRT System, this Office finds that such information is covered by the exempted documents under Section 4 of EO No. 2, Series of 2016, the inventory listed by the Office of the President, and jurisprudence.

Moreover, feasibility studies are conducted in project planning stages, which means that they may or may not be adopted or acted upon by the Department. Thus, the public disclosure thereof is premature and unwarranted. Furthermore, such premature disclosure may infringe on intellectual property rights of the authors of the study.

In Chavez v. Presidential Commission on Good Governance (G.R. No. 130716, 09 December 1998), the Supreme Court enumerates trade secrets and other confidential information as well-recognized restrictions to the right of the people to information on matters of public concerns. …

A trade secret is defined as a plan or process, tool, mechanism, or compound known only to its owner and those of his employees to whom it is necessary to confide it. It may consist of any formula, pattern, device, or compilation of information that: (1) is used in one’s business; and (2) gives the employer an opportunity to obtain an advantage over competitors who do not possess the information. …

A feasibility study includes research data, structural plans, industrial designs, compilation of information which gives its authors or the Government the opportunity to obtain an advantage over competitors who do not possess the information.

Thus, the requested information falls under the category of trade secrets which falls beyond the ambit of compulsory disclosure. It bears to note that feasibility studies undertaken, submitted, solicited, granted or awarded to the Department may even be covered by non-disclosure and/or confidentiality agreements.

Thus, releasing the requested information may cause the Government breach of its confidentiality obligations. In view of the foregoing, this Office recommends the denial of Mr. Magisan’s request.”

It is entirely possible that the request made was vague and incomprehensible, but it is interesting that the DOTr’s legal team cites a number of defenses seemingly in anticipation of more specific requests.

The reference to protected “trade secrets” is interesting. In the case of unsolicited proposals where a private party submits their own feasibility study to government, they would have good reason to prevent public release of information on proprietary techniques or technology used in their proposal. However, when it comes to the feasibility study for a government-solicited project, is the trade secrets defense viable? The government’s interest in delivering projects is for improving public welfare and not what I would call primarily commercial, or so I would hope. Neither does the Philippine government have competitors in providing public service, really.

The DOTr legal team also mentions the possible violation of non-disclosure agreements. I don’t see why a government client would be forbidden by their consultants to circulate information the government presumably owns. But in addition to that, the reasoning for the denial does not cite any non-disclosure clauses specific to an FS, only the possibility that some non-disclosure clauses may exist.  This seems to indicate a bias against releasing the FS, which may conflict with the President’s executive order on Freedom of Information:

SECTION 6. Application and Interpretation. There shall be a legal presumption in favor of access to information, public records and official records. No request for information shall be denied unless it clearly falls under any of the exceptions listed in the inventory or updated inventory of exceptions circularized by the Office of the President provided in the preceding section.

A friend of mine, Dr. Segundo Romero of Ateneo de Manila University points out that government has a strong incentive against publishing Feasibility Studies. He describes that information in Feasibility Studies, if published, “might unsettle private deals of some public officials that hinge on the information remaining confidential.” And as we saw earlier in Meslin’s history of Gardiner East, opening the books may reveal just how data-driven or politicized our planning process is.

Just How Open Should Feasibility Studies Be?

While there’s no sense in releasing feasibility studies that have not been completed, it may be useful to establish certain conceptual “milestones” in the planning process when a feasibility study can be released. In thinking about these, we have to balance the benefits of publishing a feasibility study against the reporting burden this places on the government. We also need to consider that the premature release of information might hinder the government from doing its job effectively.

At the very least, it seems to make sense that feasibility studies for projects are published once they meet with acceptance by the head of the agency commissioning them, as in the case of HS2 and the British Department for Transport. Another release can be made once the project meets final approval by a higher authority, if needed – such as approval by the President of the Philippines through the NEDA Board. Finally, publication of ex-post project evaluations can also be made when these are completed, as these also enhance public understanding of, and participation in government projects. Not everyone’s going to be happy that these studies are put out in the open, but I hazard a cost-benefit analysis will show the public much better off for it.

Featured Image: Blocked Access. Taken by author last December at the Mall of Asia.

Odds, Ends, and Evens

Will the MMDA’s new number coding scheme help traffic or make it worse?

The MMDA is set to implement yet another iteration of number coding, this time restricting odd- or even-ending plate numbers on EDSA throughout the weekday. The proposed scheme will not replace the existing Unified Vehicular Volume Reduction Program, but instead be additional to the current scheme.

MMDA Proposed Odd-Even Scheme for Mondays to Fridays

Cars are banned from EDSA during the following times:

Odd Numbers

Even numbers

7-9 AM

9-11 AM
1-3 PM

3-5 PM

5-7 PM

7-9 PM

11 AM – 1 PM : Grace Period for all cars

Let’s analyze what the new coding scheme means for transport in Manila.

What do we already know about coding?

There are few iron laws in transport economics, but just as evidence reveals, time and again, that building more roads does not get rid of traffic (Duranton and Turner 2011); number coding (in the form it currently takes, as of this piece’s writing) has been shown to worsen traffic by increasing driving and car ownership. Research in different country settings by Cantillo and Ortuzar (2013) shows that benefits of traditional number coding policies are short lived, while negative effects persist.

This coding scheme is quite a bit different, though, because there is an added restriction in the form of hours within a day, every weekday, in addition to days within the week. Let’s look at what this policy could mean.

How might travel patterns be affected?

There are roughly five ways that drivers may change their behavior in response to the new policy.

  • Drivers may shift their departure times.
  • Drivers may change their routes to avoid EDSA.
  • Drivers may shift to using cars with plates that fit their desired travel pattern. This may be by purchasing another car or by choosing to use a taxi service (including “ride-sharing” services such as Uber or Grab).
  • Drivers may shift to public transport or other modes, which will not be subject to coding on EDSA.
  • Drivers choose to travel less.

Note that this is not a flowchart-type decision tree, and individuals’ decisions will depend on a number of factors, including their sensitivity to travel time and schedule shifts, as well as the ability of the transport system to meet their travel needs.

Evening things out – “Peak Spreading”

The first two possible behavior shifts – changing departure times or travel routes – represent an outcome known as peak spreading. The theory is that instead of loading the network very heavily at a particular point in time or space, spread the loading out so that congestion at its worst is less severe. This may improve travel times during peak hours, but peak spreading has a major limitation: it can only ease traffic temporarily. Eventually, induced demand catches up with you (see Duranton and Turner, 2011) and what once were non-peak hours and routes also become congested.

The MMDA’s announcement of the new scheme came with a promise to clear a number of “Mabuhay Lanes” around the metro, to facilitate spreading the vehicle load to different physical locations on the network. While this certainly means new, less loaded routes for cars, it’s worth asking at what cost this comes. Some of these “mabuhay lanes” may be currently obstructed because they have become extensions of peoples’ homes, businesses, and communities – places of economic and social importance in their lives. How many of these places have to become rivers of high-speed traffic to make life easier for Manila’s drivers?

Taken by (different) cars – simple license plate substitution

The third possible reaction is that commuters may choose to use cars whose plates correspond to their desired travel patterns. This may be as simple as substituting to a second car that has the right plate number, or choosing to take a taxi (including Ubers, Grabs, and similar services). In these cases, there is no peak spreading or congestion reduction and private vehicle travel stays the same. If most drivers react this way, the policy may be rendered ineffective. Even then, people may still purchase new cars to fit their travel patterns, eventually leading to all the induced driving effects of old coding.

Decoded – Will lifting coding on public transport do the trick?

The MMDA’s statement also mentioned that alongside the policy, coding will be lifted on public utility vehicles to encourage drivers to take public transport. Every person that shifts from a private car to a public vehicle is an incremental improvement in how we use space. These gains, while small, are precious in an urban environment where space, according to transit expert Jarrett Walker, is the “ultimate currency.”

Lifting coding on public transport is a welcome move. Fleet sizes are artificially high because of coding, and that pushes fares up for commuters without adding value. But the government has to guarantee service levels and quality if it wants to attract existing car riders and drivers to public transport. Some passengers who travel by car do so because public transport currently fails to meet their needs for reliability, comfort, safety, or coverage. While industrial reform in the PUV sector would help meet these needs, this is a longer-term goal and will not bring immediate improvements.

Furthermore, part of the MMDA’s plan appears to be to “remove the illegal terminals in Pasay and in Cubao, Quezon City, within the month [of April].” Care must be taken to ensure that this move does not make public transport worse. Illegal terminals, like colorum services, exist because of underlying demand that is not met by the formal system. Passengers who ride to and from those terminals also need to get to work, school, and other activities. Removing the terminals without providing useful substitutes will burden these riders further.

Odd Men (and Women) Out

Finally, travelers may react to the new policy by choosing to travel less on EDSA. This may not be a short-term shift, but if the policy is in place long enough, it may impact where people choose to locate their homes, jobs, and other activities. While travel reduction reduces congestion, this may also represent reductions in access to economic opportunity, so we have to be careful about calling this a victory.

The policy also places a disproportionate burden on odd-ending plates. Assuming that most workers adhere to an 8:00 or 9:00 AM clock in up to a 6 PM clock out, odd-ending plates are at a bit of a disadvantage. Because their cars are banned during the traditional morning (7-9 AM) and evening (5-7 AM) rush hours, workers with odd-ending plates are under more pressure to change their travel behavior in response to the policy.

The current coding system has a semblance of fairness in that everyone is inconvenienced to about the same degree. In the new system, drivers with odd-ending plates will bear more of the burden for decongesting EDSA. Flex-time hours may mitigate this hardship somewhat, but keeping to the traditional workday schedule also means things like resting and rising with the day/night cycle, seeing your kids after they come home from school, and more. And if drivers with odd-ending plates react by buying cars with even-ending  plates, we could end up even worse off than we are under the existing coding scheme.

Why dont’t we just go for congestion charging?

On its face, the new scheme is more difficult to understand. Rather than just two ending numbers banned during most hours of the day, now all plate numbers are banned in one way or another during multiple short windows during the day. Enforcement, however, should be rather simple through the MMDA’s existing no-contact apprehension system, which would be presumably expanded to implement this policy.

But if we concede automated enforcement is the way to go, why not make the small marginal investment for congestion charging on EDSA? Installing automated license plate recognition technology on top of the existing CCTV network should be simple. The balance could be billed upon registration and paid to the LTO or MMDA offices. In fact, you could probably repurpose the May Huli Ba site to let people check their congestion charge balance. If you want people to shift to more space-efficient modes while traveling on EDSA, it’s a more elegant, proven solution that cannot be evaded as simply as coding. Achieving a peak spreading objective can be done more transparently and precisely through congestion charging, by adjusting the toll higher during peak hours.

How do we get the change we want?

Since the new scheme is added on top of the existing UVVRP,  we can expect more of the same transport outcomes – higher car ownership, more driving, more pollution, and more traffic. As I have argued previously, one of the key ways to make progress is to scrap UVVRP and put in a demand management scheme that is proven to work in the long term, such as congestion charging or parking levies. While congestion charging seems inequitable to some, it’s nowhere near as oppressive to the poor as auto-dependent development is – and that’s where we are now. Congestion charging AKA road pricing may seem daunting, but we already have some infrastructure for it, and it’s high time for a progressive solution instead of more of what doesn’t work.

Assuming that this new everyday odd-even coding scheme will proceed, we have to keep the end goal in mind as we plan complementary transport policy. We’ll need to ensure that the near-term peak spreading effects are followed up by long-term modal shifts to public transport, walking, or biking. Substitution to private cars with different plate numbers should be minimized. Access to economic opportunity should be maintained as much as possible.

To achieve these goals, government will need the full policy toolbox it holds between different government agencies. In addition to the MMDA’s power to enforce a coding or demand management scheme along EDSA, the government can use the LTFRB’s powers to define bus stops on EDSA that will be strictly enforced. In return for the lifting of number coding, franchise operators should agree to a stricter enforcement regime that defines and makes them accountable for service quality. The currently “illegal” terminals should be formalized and improved, and existing bus stops along EDSA should be upgraded to humane standards for safety, at the very least – including working lights and well-maintained shelters.

Making a dent in Manila’s hellish traffic won’t be easy, but clarity about how we attack it will help us avoid making it worse. While the new form of number coding seems imposing, we have to be forthcoming about what it can and can’t do, and where other blanks have to be filled.

EDIT: An earlier version of this story erroneously referred to the new scheme as a replacement of the current UVVRP. This piece has been corrected to reflect that it will complement the existing UVVRP.

A Strike, While the Iron is Hot, Pt. 2

Why our business model for the jeepney sector needs an overhaul.

Last post, I discussed the reasons for wanting to modernize the physical machinery of jeepneys – the vehicles themselves. In this post we will talk about the thornier half of the modernization – the proposed move to a new economic and industrial model.

The reason I began with the reasons for technological modernization is because the issues are often conflated with the motivations for industrial reform. Take Rappler’s article, whose subtitle reported that drivers were on strike to “protest plans to phase out old PUVs”. The Star’s piece led by describing the strike as being “against proposals to phase out aging jeepneys.”

I shared those pieces not to lambast the media, but to illustrate the confusion that usually surrounds the modernization debate. Observers excited by the prospect of technical modernization may see the protesters as superstitious and protectionist. However, like the Luddites two hundred years ago, raging against the machines is only the visible half of the protest. The strikers believe they are on the frontlines against a policy that will leave hundreds of thousands of Filipinos jobless. That the term “Luddite” has come to be used as a pejorative for backwardness discounts the real desperation felt by the strikers, and shows the tendency of labor to be considered expendable in reform.

In spite of the seriousness of the matters involving economic reform, there is little dissection of the policy issues in the aforementioned pieces, beyond the PISTON representative Mr. George San Mateo arguing against the proposed capitalization requirement. There is no mention of the DOTr’s opinion of the need or rationale for economic and industrial reform. My aim in this post is to lay out what that aspect of the modernization means for the jeepney industry, and what matters will have to be resolved one way or another in the final form of the PUJ modernization. While for the most part I refer to PUJ or jeepney modernization, much of this discussion also applies to the bus industry.

The PUJ Business Model

The following diagram is from Silcock (1981), but is still illustrative of the typical economic relationship between passenger, driver, and operator.


Note that the government still regulates fares, but drivers collect them. The boundary fee is unregulated and ranges from P600-900 per day, and fares per passenger are regulated by LTFRB, usually around P7.50-P8.50 per ride. (historical tables for Metro Manila are at fare_rates_MM).

Revenue for drivers is subject to a lot of uncertainty. For instance, take the price of fuel. The LTFRB occassionally raises or lowers fares in response to changes in fuel prices, however the boundary fee – the source of jeepney owner/operator revenue, does not change in reaction to fuel prices.

In order to make enough money to pay for boundary and other operating costs such as fuel, many drivers drive for more than sixteen hours a day. Each jeepney is driven by two, sometimes three drivers taking turns in these long, grueling shifts. By the end of the shift drivers are fatigued and more prone to unsafe driving in a vehicle whose mechanical controls may not be all there.

Many jeepney drivers choose to drive from early in the morning to catch the profitable morning peak, but also to maintain a semblance of a normal day-night cycle in the absence of a government guarantee on service levels. In the evening, fewer jeepneys are on the road because drivers who made their money in the morning have gone home. This scarcity is why jeepneys in the evening peak tend to be more fully loaded.

Transport Economic Outcomes of the PUJ Business Model

The PUJ business model motivates drivers to do everything within their control to maximize profit. This leads to the following behaviors:

  • Unscheduled stops to take on more riders
  • Reducing scheduled maintenance
  • Cessation of service when marginal revenue is lower than marginal cost

As long as drivers bear the risk of ridership or patronage, getting the most people on a jeep will take the highest priority over safely driving or maintaining the vehicles. The effects of this incentive are easily observed: drivers stopping unpredictably –  even in illegal locations – to take passengers, drivers blocking each other to ensure passengers get on their own jeeps, and drivers speeding on streets where it is unsafe to drive at high speeds.

One interesting quality of public transport is that there are intrinsic barriers to competition. Most passengers waiting on the curb cannot look at a jeep and easily distinguish between one that is well- or poorly-maintained. Riders can’t tell prior to boarding if the driver is someone who has been driving for three hours or thirteen. This is a market failure that the government can remedy through regulation, but to date the LTFRB’s regulatory tool has been prescribing penalties and fines for violators. This imposes an enforcement burden on the government and leads to incidents of bribing enforcers to avoid fines.

On the cost side, notice that the owner bears costs associated with making sure the vehicle can run at all.  The owner has little involvement beyond that. The driver bears costs associated with making the vehicle run regularly. If the vehicle has to be taken in to the shop for repairs, the owner loses revenue because the vehicle is out of service, but so does the driver. Therefore, the drivers have an incentive to perform as few repairs as possible while driving the vehicles for as long as possible. This is why many jeepneys drive at night even when the headlights don’t turn on. Such a state of disrepair would be unacceptable in many other places, or for private vehicles in the Philippines, but is commonplace for jeepneys.

More than cost risk, drivers also directly bear risk from fares. Drivers pay out their costs from the farebox, which means that things that affect ridership or fare levels directly impact their wages. If the government creates another public transport service that competes with the jeepney service and reduces congestion on the vehicles, the public wins, but drivers lose. If the government reduces fares, the public wins, but the drivers lose.

Even if the government keeps fares low, low fares do not necessarily mean a service that costs less. In the current system, commuters bear costs of unsafe and unreliable service. Drivers bear the cost of grueling working conditions that take a toll on their health. Whenever there is a fare rollback, drivers have less to feed their families with. The non-riding public bears the cost of pollution and noise, not to mention danger, from poorly-maintained vehicles passing through their neighborhood. Passengers may not be paying much in cash, but there are many other costs imposed on the public that are direct consequences of the way the system is set up.

The big takeaway from this discussion is: in the current system, operator incentives are in conflict with the public interest, which leads to poor service being a natural outcome and operators stifling attempts to improve the system. This isn’t the fault of the drivers, they’re just operating rationally in a system that isn’t designed very well. A better way to organize the economic arrangements would align government and operator goals instead of place them in conflict with each other.

Government Solutions: The Modernization Package

The government’s first move towards modernization appears to be a 2013 order calling for strict application of the 15-year age-limit on “public utility minibuses.” There also appears to be an upcoming requirement for jeepney operators to have a minimum fleet of ten vehicles plus a capitalization requirement of P7 million. The executive branch has proposed using government funds to assist with the funding and financing of the fleet modernization, but the details of the package have not been finalized.

Beyond these scattered pronouncements, there are not many official announcements laying out what the actual policy package is. DOTr’s facebook page has some images uploaded that seem to point to aims of the PUV modernization program. Let’s focus on the ones that point to major operational shifts:

  1. Local public Transport Plans


Road-based public transport crops up at the moment where a private entity sees the opportunity to make money. Network maps are not based in practice on sort of development or land use forecasts, and the concept of a timetable is foreign to the PUV sector. Local Public Transport Plans should allow the government to define the geographic scope of public transport systems, as well as define service levels that correspond to the profile of travel demand throughout the day.

In creating Local Public Transport Plans, authorities will have to consider whether they want to provide public transport service that is not necessarily financially profitable, such as to deprived areas where passengers may not be able to pay very much for public transport, let alone any other kind of transport. In the current system, these places are underserved by public transport, compounding other forms of poverty that residents may be experiencing. Thinking about how to provide these services is an important part of a successful modernization policy.

2. An end to the boundary system?


Putting drivers on fixed salaries, with employment benefits, in better labor conditions will be a big step towards making the public transport system more humane. The question, of course, is what this means for the labor market, particularly drivers on routes designated for upgrading to higher-capacity vehicles. It’s not clear at this point if the government will guarantee employment for current workers in the new system, but there are plenty of ways to mitigate job loss by retraining for other useful tasks within the industry. Shorter shifts for drivers will mean a higher driver requirement. Beyond that, drivers can be retrained as mechanics, vehicle safety officers, and station managers/patrollers. Current industry workers don’t have to take a loss here if the DOTr does this right.

One important promise made here is that drivers will no longer bear ridership risk. We’ll have to see if this becomes actual DOTr policy (and whether this risk will be held by operators or the government), but this reform will solve many of the current system’s problems, especially around safety and reliability.

3. Requirement of fleet management


Fleet management is a familiar term to people who work in logistics, trucking, or any company big enough to worry about managing a large stock of vehicles. This infographic seems to call for putting the component systems of fleet management in place, such as:

  • Organized repair, refueling, cleaning and maintenance
  • Vehicle tracking and management (through GPS)
  • Driver tracking and organized shift scheduling

Fleet management in the PUJ sector is not a new concept. Groups such as 1-TEAM (formed by the 1-UTAK party list), Comet, and Filinvest all are in some form of fleet management business. The major shift implied by the infographic is that having a fleet management system (or contracting with a fleet management provider) will be an operator requirement.

The cost of organizing functions which operators already (at least nominally) perform might be more than zero, but there are scale effects in providing these services to transport operators, so the cost can be spread across the industry. This setup also makes operators directly accountable for maintenance, shifting maintenance risk to them instead of having it held by drivers. Consolidating fleet management will make it easier for the government to ensure service, safety, and quality standards in the transport system.

Sum Up – A Satisfying(?) (Non-)Conclusion

There are many reasons to favor a shift to a different economic model for public transport provision. However, the devil, as they say, resides in the details, and absent a clear, comprehensive proposal from the government, policy discussions remain speculative and academic. In order to clear the air and move forward with the transition to a better system for all stakeholders, the government should release an official policy document on the modernization program as soon as possible, clearly outlining its appreciation of the need for reform, the end goal of the reform, and the policy components that will get us there.

Another important consideration is how much the government is willing to pay out of the public’s pocket to subsidize the modernization and/or the operations of a modernized system. Part of the policy statement that will have to be made is whether the non-riding public should pay in part to develop a quality public transport system.  Public transport that operates at high quality typically requires subsidies, but these subsidies are justified by the direct and indirect benefits that quality public transport provides to the communities they operate in. There is also an equity consideration as mentioned by PISTON, given that jeepney drivers and operators may have limited financial ability to fund the purchase of new vehicles. Regardless of what the government decides, it is good for it to be as transparent about its policy direction as early as possible.

Besides commuter outcomes, modernization should also consider effects on labor in the current industry. The current system is hardly the best of all worlds for drivers, who had to fight for rights to be recognized as employees in their relationship with the vehicle owners who collect their boundary fees. Economists such as David Autor have shown that labor market shocks can have “scarring” long-term effects that affect secondary development indicators, especially the family circumstances of displaced workers. To be really progressive, the government should consider the modernization an opportunity to reform an industrial system that some have described as exploitative.

Modernizing a flawed public transport system is a daunting task, but a clear conversation is important to make sure welfare is maximized and no stakeholders are left behind. Rather than accept win-lose narratives, the public would be better served by a plan that aligns service incentives and allocates risks to parties can best mitigate or absorb them. The light may be at the end of the tunnel, but we’ll still need a useful public transport service to get everyone there.

Credits and Unlinked References:

Rowhe Rodriguez for banner image. instagram: @thepixillated

Silcock, D. 1981 Urban paratransit in the developing world, Transport Reviews, 1:2, 151-168

DOTr Philippines for images: “Goals of PUV Modernization”

A Strike, While the Iron is Hot Pt. 1

Do we really need to “modernize” the jeepney?

A key element of any protest is disruption – no protest that accomplished anything good did so without bothering the public. While Filipino commuters are thus inconvenienced by today’s nationwide jeepney strike in protest of PUJ modernization, many concede that PUJ workers would only give up a whole day’s wages in order to address legitimate grievances. Amid the calls for solidarity with PUJ workers, it is worth remembering that true solidarity demands critical engagement with the issues and understanding what is being fought for. In this series of posts, I will try to unpack what’s going on in Jeepney Modernization from a transport policy perspective. There are two sides to this story: first, I will discuss the more apparent aspect of fleet modernization, where I will talk about the technological and strategic motivations for transitioning to a different type of public transport vehicle. In an upcoming piece I will tackle the industry and economic modernization that can (and probably should) accompany modernizing the jeepney fleet.

Fleet Modernization 

This is the most common point of engagement – what is the strategic motivation for transitioning the current PUJ fleet to a different type of vehicle, and what should be considered? Why do we even want a replacement for the jeepney? Answers to these questions have to be articulated in order to ensure that the modernization produces as big of a win for as many stakeholders as possible.

Vehicle Roadworthiness and Emissions: The average jeepney is decades old. Many are held together by improvised, literally ‘panakip-butas’ repairs, and the technology dates to a time before emissions standards were even nominally considered. Consequentially, jeepney commuters travel in vehicles that are unsafe and highly polluting. Clarity is essential: arguing for continuing the use of the current fleet is arguing for maintaining current commuter conditions of health and safety. These are standards that our government would actually find unacceptable, were enforcement in full effect. I would be very surprised if any jeepney would pass Euro-IV emissions standards, which our government itself adopted ten years behind the EU.

Vehicle Design:
Apart from the mechanical qualities of the vehicles, some opponents of modernization also allege that the jeepney aesthetic is inextricably linked to Filipino identity, and that “something” is being “lost” by decommissioning these iconic vehicles. But even if we could theoretically produce perfectly roadworthy, low-emission vehicles in the ubiquitous jeepney shape, we have to again be clear about the commuter consequences of this vehicle design (the post image should be a good reference, if necessary):

Unsafe boarding and alighting:

In order to board a jeepney, a commuter (who is not riding shotgun) has to step behind the vehicle into traffic to board from the rear. Alighting requires stepping out of the same point into a lane of traffic. This increases risk of collisions with other vehicles especially at busier intersections, where many people have to clear the vehicle in order to facilitate passenger movements.

Ideally, vehicles should have doors for boarding at the curbside to ensure that passenger movements are safely separated from vehicular traffic. Multiple boarding doors will also allow for faster boarding and alighting, lower dwell times, and ultimately faster public transport service.

High entry and low seating position:

Boarding the jeepney is difficult, if not impossible, for commuters with less than fully abled movement. Once inside, passengers are placed into a crouched position that can also be uncomfortable, especially for those who are not fully abled. A design that allows for a mix of comfortable standing and seating can address this.

Low vehicle capacity:

The low capacity of a jeepney leads to the need to use many vehicles to serve high-demand routes. Lower capacity vehicles mean that more drivers have to work in order to serve the same demand that could be served with larger vehicles. Driver and crew wages are the largest driver of road transport operating costs, and this cost is larger when more drivers have to be deployed. Furthermore, jeepneys do not necessarily save you much in terms of other operating costs. A jeepney’s fuel economy is about 5.69 km/li while a PUB’s is rated at 2.67 km/li*, which means a jeepney can drive around 2.1 km for every 1 km a bus can drive for the same liter of diesel. However, PUB’s typically carry between 55-67 passengers during peak hours while jeepneys carry around 16-20. This means that if vehicles are loaded to capacity, diesel buses can carry more passengers per liter of fuel consumed (nearly twice) than diesel jeepneys can. This leads to higher fuel consumption for the same service, compounding the polluting effect of high-emission vehicles in addition to increasing unit costs. For some routes, it will make sense to combine a number of jeepney services into a smaller number of bus services, for instance, and I’ll touch more on that in Part 2 to this post.

Call me an optimist, but I think PUJ operators don’t disagree in principle with the idea that the riding public should be carried in a better-designed and better-built vehicle. The question posed by the strikers is whether the cost of fleet turnover can be reasonably fully borne by workers in a low-wage industry.  The government, for its part, has indicated that the cost of modernizing the fleet would be shared by the public, though precise details of the proposal are still being hammered out. Perhaps that is the ultimate purpose of a strike like this – a reminder that to some, it matters very much where those hammers fall.

Coming up: In Part 2 of this piece, we’ll step into the economic and industrial side of jeepney modernization – a less visible but arguably more important aspect of the wide-ranging reform. Replacing the fleet of vehicles is well and good, but simply buying new vehicles will not create a more useful service that is better positioned to address the Philippines’ urban mobility and congestion issues.

*Karl B. N. Vergel and Noriel Christopher C. Tiglao. ESTIMATION OF EMISSIONS AND FUEL CONSUMPTION OF SUSTAINABLE TRANSPORT MEASURES IN METRO MANILA. PHILIPPINE ENGINEERING JOURNAL PEJ 2013; Vol. 34, No. 1: 31-46 Philippine Engineering Journal Received: July 16, 2012 Accepted: February 22, 2013
Photo Credit: Rowhe Rodriguez