Thursday, September 13, 2018

BWorld 249, Reduce fares and increase passenger convenience by increasing supply

* This is my article in BusinessWorld last September 11, 2018.

Economics is the study of proper allocation of limited resources mainly via market mechanism. If there is rising demand for a particular commodity or service, the price goes up as indicator of consumers’ willingness to pay for more services or goods, and this tells existing and potential providers to increase the supply as there is more revenue and profit to be made.

When the supply outstrips the demand due to rising competition, the price begins to flatline or decline, telling producers to stop expanding the supply, otherwise the price will keep declining further and they will lose money and may go bankrupt.

The role of government as regulator and prohibitor in this case should be limited unless a commodity or service can directly and adversely affect public health and safety, like the sale and distribution of guns, ammunitions and bombs, toxic and poisonous substances, and substandard or expired medicines, food and drinks.

When government intervenes and regulates a lot even for very useful services like providing convenient public transportation to people who have no cars or have cars but do not want to drive because of frequent heavy traffic, that is a signal or red flag that government becomes abusive and is engaged in corruption and cronyism, directly or indirectly.

The Land Transportation and Franchising Regulatory Board (LTFRB) is among the most bureaucratic and prohibitionist agencies in government. It issues plenty of NOs, prohibitions and restrictions to entrepreneurs and companies that want to provide convenient and safe rides to the public.
The long lines of people daily in many areas and cities who cannot get fast and convenient rides are the result of LTFRB bureaucratism. The franchise of legal and accredited air-con vans, buses, ride-sharing services is limited and capped or controlled at low levels. This seems a calculated move so that there will be more illegal and “colorum” vans, buses, ride-sharing cars as passenger demand is very high. And that is where lots of apprehensions, driver harassment, corruption and extortion can come in.

Last week, there were two news reports in BusinessWorld about continuing LTFRB bureaucratism of transport network vehicle service (TNVS) or transportation network companies (TNC):

(1) “LTFRB junks order for Grab to reimburse passengers” (Sept. 5), and

(2) “LTFRB approves P2-per-minute TNVS charge” (Sept. 6).

Report #1 is the agency taking back its previous order that Grab should reimburse future passengers but it should still pay the agency P10 million for “overcharging” its passengers and failure to inform the board of its P2-per minute charge.

Report #2 is the agency allowing the per minute charge and ordering TNVS to give detailed and unbundled breakdown of fares — flag down rate, per kilometer rate, travel time rate and surge price.

The P2-per minute charge is an important incentive for drivers to endure heavy traffic or flooded areas and pick up, bring passengers to their destinations.

In a deregulated environment, TNVS should be allowed to charge whatever amount as their per minute charge so long as passengers know their rates via online transactions. So a TNVS can charge P5, P10 per minute or higher — because it is fielding an SUV or a BMW or Benz to passengers who can afford.

I checked the LTFRB budget, the biggest item is on its “service” for issuing the Certificate of Public Convenience (CPC), granting of permits and establishment of routes.

One can interpret it as we taxpayers giving the LTFRB hundreds of millions of pesos yearly so that it can choose who among the entrepreneurs and businesses can expand and who should be choked. We are giving them lots of money so it can harass and even confiscate and impound private property that provide services to wary and harassed passengers but has no accreditation precisely because the agency has capped and limited the number of accredited vehicles to small numbers.

LTFRB bureaucratism seems to be doing the exact opposite of what government should do — to respect private property and allow market mechanism to respond to passengers’ rising and changing demand.

See also:  

No comments: