DOTC about to destabilize banking sector, spread misery all around


On the surface, the DOTC’s new stiff penalties on colorum operators and other franchise violations are heaven-sent. What is not to like about a P1 million fine on vehicles caught operating without a franchise? Those spoiled public utility operators have long gotten away with murder and it is about time that they get their due.

Right? Who can contest the good intent of the order. The punditry, writing without context, has cheered the DOTC order.

Yet a deeper look at the order would reveal its many flaws. It is a policy crafted in total idiocy, devoid of any consideration of what the Marxists fondly call the “objective conditions” of the broader economy and society. It’s as if the order came from the alien gods, who have no clue on the savage impact of the order on the banking system, jobs and the lives of the Filipino Everyman. I will elaborate.

Land transport has been a low profile sector of the national economy. Yet, it is one sector that has forged a close and productive relationship with the financing mainstream. The country’s major banks have a substantial exposure in the sector, from bus operators expanding or modernizing their fleets to the smallest UV operators. Taxi operators get loans, too. The same with truckers and freight haulers, which make up a vital backbone of the national economy. A medium-sized bus company, for one, has an average exposure of half a billion pesos from its creditor-bank.

The banks lend to the transport sector either through the banks themselves or the their adjuncts that precisely deal with the financing needs of the land transport operators – their leasing companies. Even the major state-owned banks have leasing companies with focus on transport and fleet loans. The mainstream banks so covet the transport lending business that the bank themselves and their leasing arms grant loans simultaneously to the same bus company at premium rates. Most bus companies, in turn, make it a rule not to delay or reschedule payments.

Unleashing armies of traffic enforcers onto the major roads to implement the anti-colorum/anti-out-of-line order of the DOTC would lead to this inevitability: reckless imposition of fines, which would lead to huge financial losses, and which would ultimately lead to the collapse of the bus industry first, then the other operators – like truckers and taxi operators–later.

The next scenario is predictable – banks reeling from the pile-up of unserviced transport loans. If the DOTC does not see this frightening scenario coming, just ask the banks and their leasing companies on the extent of their exposure to the transport sector. Or, in secret, the DOTC people can have a heart-to-heart talk with the BAP, the Bankers Association of the Philippines.

This is the most important question to ask? Why would the penalties cripple the transport sector and ruin most of the operators? Cannot the transport companies pass the strictest of franchising rules?

The bus sector, the largest segment of the land transport sector, has been operating on the principle of route extension and flexibility. In some areas, they over-extend a bit to serve busy passenger routes. They adjust their franchises to meet public conveyance needs and that has been the practice for decades. Under the DOTC order, this constitutes illegal operations and should be fined big.

The problem is this: the mess was created by the government itself. The last route rationalization program and granting of franchises–take note of the year–were done in 1992 yet. The population then was barely over 60 million. That was the year President Cory Aquino turned over the presidency to a new leader. The moratorium on grant of bus franchises, would you believe, still reigns in 2014, with the population of over 100 million and with Cory Aquino’s son as president.

The year 1992 did not have the words that are the staple of the national life today: smart phones, BPO explosion, Facebook, Twitter, TIPLEX/SCETEX.

Between 1992 and 2014, bus operators have been making do with flexibility to fulfill their public service mandate. It has been the compromise mode to both serve the public and avoid running as colorum operators. Remove the flexibility factor and the mass transport system will ground to a halt.

Who do you think should own the blame for the franchising mess? The DOTC. Instead of brutally penalizing the land transport operators, government should pin medals on them for carrying on despite the stupidity of the franchising policies.

The bus industry is a cowardly group and the operators would not want to tangle with the DOTC in this fight. Their recourse is the court of law. But the jeepney drivers and operators, truckers and their workers, taxi operators and their employees, UV operators their crew would not take the DOTC penalties sitting down. What will they loose? It is either to fight for survival or die a slow death anyway. Tens of thousands of transport workers will be rendered out of job by the DOTC order on penalties.

What if they can convince the public that all these regulatory brutalities can find their root in the complacency of government itself? Then, they could set the ideal environment for a transport strike with public support.

Indeed, land transport is perhaps the only economic sector that gets no incentives from government (the last land transport incentive program was carried out by Oca Orbos in 1988 yet) but has been at the receiving end of interminable regulatory prescriptions.

There are over a dozen agencies regulating the sector. And all of them have been salivating over the prospect of issuing those P1 million per violation fine. Or, the answer to this question. What do I get if I don’t issue a P1 million ticket? What is in there for me?


Please follow our commenting guidelines.


  1. Ang pagkakaintindi ko e ang multa e para sa colorum hindi sa traffic violation. Tama lang siguro na taasan ang multa para mawala ang mga colorum na sasakyang pampubliko

  2. Stiff penalties means loose enforcements by lining up the pockets of the enforcers! Surely, the “give and take” (bribery) and “milkshakes” will be the incentives of the enforcers. DOTC must study the traffic conditions, infrastructure, public riding requirements, current number of franchise operators and their units to be able to determine whether to issue additional franchises, thus reducing colorum operations.
    Stiff penalties may only exacerbate the need or lack of transportation to the detriment of the riding public. Hence, the question is how and why did DOTC came up with “stiffer penalties” as a solution to what? If colorum operations proved to be beneficial to the riding public and provides more job without constricting traffic congestion further, then the solution is more franchises be issued, thus eliminating colorum operations and more taxes and revenues to the government!
    Jun Adan
    New York City

  3. Bernardo Carpio on

    I think the 1st thing that they should do is fix their own house first.
    The DOTC is a disgrace.

  4. How to close down a Taxi Company:

    10 taxis…10 drivers. If all 10 drivers have a single violation in a day, the Taxi Co. would need to pay out P5000/per violation for a total of P50,000 for all 10 violations for that day. Now repeat the process for a couple of days, and the Taxi Company will soon be on the red and on its way to bankruptcy.

    It would be so easy to close down any taxi company just by banding the drivers together, maliciously or not.

  5. Mr Pinol is only focused on the immediate effect on banking. But how much is the exposure of the banking industry to the transportation sector, my hunch is really not that much. What he is lobbying is really just what is wrong with our country and the impediments to reform. We are widely criticized in the world community as very accomodatative even to criminals and wrong doers. The Marcoses and President Estrada is now freely roaming the streets with just a token of prison service. With all due respect to Mr Pinol, it’a about time to see the bigger picture and be more forward looking.

  6. Could see your point , penalty is too stiff that it will surely kill free enterprise instead of reforming the non-compliant bus owner operators. Thru application of incentives like discounts of tickets 10 percent or more for those who pay for each traffic violation , authorized banks or agency are the only ones allowed to accept penalty payments instead of traffic enforcer (who tend to accept bribe commonly practiced ” pwede namang mag suhol, bakit pa. And if there is CCTV installed it will help deter violators by observing the speed limit allowed and eliminate corruptions

  7. A frightening scenario indeed…! Just another scheme to make violators pay up bigger than before…obvious di ba?

  8. Im sorry but i dont see your arguement. It seems you are saying that legitimate bus companies or vans or jeepneys if legal will also be affected. I say no it wont. If you are driving illegal routes then stop. If there is a need on those routes for buses or what ever then apply to have a route there. If people cant get transport because none are allowed to operate that route im sure even the most incompetent government ( which all your successive governments are ) will see the need to put a route there & so a legal route will then start working there. I was a licensed taxi driver for 12 years & we knew where we could operate from, all bus companies in the uk know what routes they can operate. If a new housing estate is being built bus companies would apply or a route to pass there & it would get sorted. Its here everyone thinks its ok to just go out & drive illegally here to earn a living. If thats what you are condoning then you are wrong.

    • I agree with you dustin. The transport industry is not the only sector that our banking system serves. Even if that is the situation, I am sure that the loans our banks granted the transport sector are secured with those vehicles as collaterals. It looks like that this article is written with the premise that all our public transport are colorum which I believe is not the case.