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Tuesday, February 18, 2020
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Better public transport from road users’ fees



AMONG the options or ideas for additional taxes, one of the best is to increase car registration fees — also known as the Motor Vehicle Users Charge (MVUC) — and use the revenues collected to improve public transportation. This is exactly what House Bill 4695, filed by Albay Rep. Joey Salceda, proposes. We all need to rally around this bill and make sure it passes into law.

In the past, the MVUC was used mainly to finance road maintenance. Today, we recognize that private motor vehicle use has serious environmental, health, economic and safety costs for society. Besides the “wear and tear” on roads and bridges, using motor vehicles also leads to shortened life expectancy and higher incidence of cardiovascular and respiratory ailments because of air pollution; reduced mobility and increased traffic congestion, where private cars occupy most of the road space; the eventual cost of proper disposal of old motor vehicles, including its toxic wastes, at the end of their usefulness; the costs associated with collisions, injuries and fatalities with more cars on the road; and the acceleration of climate change because of the increase in greenhouse gas emissions from vehicles. It is only fair that society should extract compensation from the main sources of these costs — motor vehicle owners.

Today, car owners represent only a small minority of the total population, even though our city roads are filled with cars. Car owners are also from the wealthier segments of our society. Because the MVUC has not changed since 2004, it makes sense to increase it and use the additional revenues to make life better for those without cars.

Meaningful incentives are needed to encourage non-car travel (walking, cycling or using public transport) and discourage private vehicle use. There is not much road space to accommodate more cars and motorcycles, and it is not feasible for the government to build or widen our roads to match the growth in the vehicle population.

Consider this: to keep the level of congestion constant in the Greater Manila Area, given that the vehicle population in the metropolis increases daily by over 500 cars, we would have to build 10 kilometers of additional roads every day, which is not feasible. Therefore, our vision should be to make public transport, walking and cycling as attractive as possible, so that car owners would leave their cars at home and those without cars would have no reason to purchase a new vehicle.

The most significant and far-reaching policy reform of the Duterte administration, I would argue, is the Public Utility Vehicle Modernization Program (PUVMP). It aims to transform the mobility landscape nationwide by requiring the replacement of old, unsafe and polluting vehicles and the shift of the road-based public transport industry to a new business model.

Implementing the PUVMP is the key to improving the quality of road-based public transport, especially buses and jeepneys.

Under the PUVMP, transport operators on the same route are required to consolidate themselves into one legal entity in order to improve services and avoid risky and inefficient on-street competition for passengers. With all vehicles on the same route operating as “one team,” vehicles can be dispatched in response to changes in demand. There would be pooling of all revenues using a electronic fare collection system. With economies of scale, operators could avail themselves of lower costs for fuel and repairs.

The challenge here is to achieve a smooth transition, with little social conflict and minimal displacement of vehicle owners, drivers and industry workers. One obstacle to the PUVMP is that many jeepney operators are uncomfortable with any change in their existing business model. They prefer to retain individual ownership of their vehicles and keep the “boundary” system, in which drivers pay the owners a fixed daily rental for using the vehicle. They also see consolidation as a cumbersome process, and are worried about incurring a large loan in order to buy a new vehicle.

Because the current subsidy level for replacing their old jeepney is only P80,000, many jeepney owners consider this too small, compared to the average P2-million price tag of a modern jeepney. Many lenders would also like to see a larger subsidy for every vehicle as the subsidy amount serves as the down payment or equity of the borrower. With the current subsidy, the equity comes to only 4 percent of the new vehicle cost, far below the 15 to 20-percent equity that private banks normally require.

If the P80,000 subsidy for every jeepney is too small, what amount is appropriate, then? We need to be practical. There are huge benefits in transforming the road transport industry and making it safer, more comfortable, more reliable and more service-oriented.

Where the welfare of millions of Filipinos is at stake (over 20 million Filipinos ride buses and jeepneys daily), we should not be motivated in the first instance by frugality.

To overcome the prevailing resistance of jeepney drivers to change, the “carrot” needs to be attractive and substantial. The subsidy should be more than the market value of the old jeepney. At a minimum, the subsidy should result in a daily financial return, after loan amortization payments are considered, that matches or exceeds the “boundary” income that jeepney owners receive each day. The subsidy should also enable the jeepney owner to offer a meaningful down payment or equity to give lenders greater confidence to offer financing for PUV modernization.

With the worsening mobility of urban Filipinos, decisive and dramatic action is needed. If the subsidy is increased to P500,000, it would require a budget of P100 billion to replace 200,000 units (or an affordable P20 billion annually over five years). One hundred billion pesos may seem like a lot, but it is very reasonable when we consider the benefits for the over 20 million Filipinos who ride buses and jeepneys and many more who breathe the air in our cities.

One hundred billion pesos is not a lot when we compare the economic losses of P3.5 billion a day in the Greater Manila Area and P1.1 billion a day in Metro Cebu from poor mobility, as estimated by consultants of the Japan International Cooperation Agency. Approach your representatives in Congress and ask them to support House Bill 4695.

Robert Y. Siy is a development economist, city and regional planner, and public transport advocate. He can be reached at mobilitymatters.ph@yahoo.com or followed on Twitter @RobertRsiy

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Today’s Front Page February 18, 2020

Today’s Front Page February 18, 2020