BWorld 215, Urban mobility index and transport disruption

* This is my column in BusinessWorld last week, May 24.

As incomes rise around the world, they tend to stay within cities, urban hubs, and rural areas on the cusp of urbanization. Congestion follows as a result, even if property developments are done vertically.

After searching for an international transportation or mobility index that includes Metro Manila or the Philippines, I found one made by the Arthur Little Consultancy. They developed the Urban Mobility Index, a point system with 100 points as the perfect score.

The index is composed of three groups of urban mobility systems: Maturity of the system (36 points), Innovation (24 points), and Performance (40 points), with nine topics in each group. These are: Transport-related CO2 emissions, NO2 concentration, PM10 concentration, PM2.5 concentration, Traffic-related fatalities, Increase share of public transpo (PT) in modal split, Increase share zero-emission modes, Mean travel time to work, and Motorization level.

The second biggest group, Maturity, and its nine topics are: Financial attractiveness of PT, Share of PT in modal split, Share of zero-emission modes, Road density, Cycle-path network density, Urban agglomeration density, Public-transport frequency, Urban mobility initiatives, and Urban logistics initiatives.

About 100 cities worldwide are covered. Surprisingly, Metro Manila has scored moderately and not in the lowest group of cities (see Table 1).

People may wonder why Metro Manila has ranked higher than Osaka or Sydney or Kuala Lumpur. Perhaps the surveyors and researchers covered only the EDSA area where a train — however cramped — exists and jeepneys and tricycles are banned. Vehicles move along at slow speeds during rush hours.

Disruption in urban mobility was first made by MRT/LRT a few decades ago. However, an increase in capacity was few and far in between, resulting in a persistent “transport crisis.”

The second round of disruption was made by vans and UV expresses, which help ferry passengers from high density locations and help them avoid taking multiple rides to their destinations.

However, this local initiative was restricted by the government via the LTFRB as it severely limited the franchising of UV express vehicles and heavily penalized vans that were “colorum (unregistered).”

A third round of disruption was introduced by a multinational company, US-based Uber. It was so successful, it inspired a regional competitor, Singapore-based Grab, to offer the same service.

Unfortunately, the LTFRB kept to its antiquated regulations, restricting the number of cars to serve both Uber and Grab. It later penalized Uber with a substantial fine.

Plagued with its own financial issues, Uber later decided to quit Southeast Asia and merge with Grab.

Meanwhile, actions of the LTFRB leave much to be desired.

Of the 19,000 Uber drivers, only 11,000 were absorbed by Grab since these were the only ones accredited by the LTFRB.

Some 6,000 former Uber drivers are still waiting accreditation and are unable to drive for Grab because they are not in the LTFRB master list while some 2,000 ex-Uber drivers have possibly given up (see Table 2).

Grab Philippines Country manager Brian Cu brought this up during his presentation during the BusinessWorld Economic Forum 2018 on May 18 at Grand Hyatt Hotel, BGC in Taguig City. The forum’s theme was “Disruptor or Disrupted: The Philippines at the Crossroads.”

Ride-sharing and TNVS scheme are disruptors in urban mobility system and thousands of commuters have benefited. The LTFRB and government bureaucracy have disrupted this in their own way, resulting in increased inconvenience for TNVS passengers.

To this day, the LTFRB continues to control fares and cap surge pricing, a move that discourages drivers from getting incentives for picking up passengers even in inhospitable areas. This, despite the fact that the agency has already limited the number of accredited drivers, as discussed previously.

Providing comfortable, convenient, and safe transportation is not a crime and government has no business limiting this kind of entrepreneurship. Government should instead further expand competition, stay away from price and fare control, and allow commuters to have more choices.

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See also:

BWorld 207, Fare control and surge cap are wrong, May 10, 2018

BWorld 213, Disruption, inflation and taxation, May 23, 2018 

BWorld 214, Disruption in global economic power, May 24, 2018 

BWorld podcast 2, TNVS fare and surge control are wrong, May 26, 2018

BWorld 209, Is the PCC a facilitator or a hindrance to business competition?

* This is my column in BusinessWorld last May 07, 2018.

Even before the various competition bills in Congress ultimately became the Philippine Competition Act (PCA) of 2015 or RA 10667, I have been asking myself this question.

After all, I have observed that the main creator of monopolies and oligopolies is the government itself through constitutional restrictions on public utilities and creation of “natural monopolies” like electricity transmission and distribution, water distribution, which, in turn, require congressional franchises.

Other monopolies or oligopolies are created by various agencies, like airline routes (CAB franchise), shipping routes (MARINA franchise), telecommunications (NTC franchise or permit), jeepney and bus line route (LTFRB franchise), tricycle route (LGU franchise).

So the basic question would be: What can the Philippine Competition Commission (PCC) do to limit or curtail the granting of such state-created monopolies and oligopolies?

Last week, I interviewed PCC Chairman Arsenio Balisacan in his office. Sir Arsi is a friend and was my former teacher in the ’90s at the graduate program of UP School of Economics on the subject of Development Economics. [The discussion between Mssrs. Oplas and Balisacan, which covered several topics, will be uploaded on BusinessWorld’s YouTube channel soon. — Ed.]

My opening question to him was a light one, “Do many people mistake the PCC with a racing or sports commission?” He smiled and answered that it seems to be a common misconception for many people especially in non-urban areas, they ask what sports competition the PCC is promoting.

The confusion may be understandable as there are 16 Commissions under the Office of the President alone. These are the Commissions on: Climate Change (CCC), Filipinos Overseas (CFO), Filipino Language (CFL), Higher Education (CHED), Anti-Poverty (NAPC), Culture (NCCP), History (NHCP), Indigenous Peoples (NCIP), Muslim Filipinos (NCMF), Pasig River (PRRC), Women (PCM), Racing (PRC), Sports (PSC), Urban Poor (PCUP), Youth (NYC), and the PCC.

I checked the latest report of the World Economic Forum (WEF), the Global Competitiveness Report (GCR) 2017-2018, to see how competitive the Philippine economy is and by extension, the domestic private businesses, compared to its neighbors in East Asia.

Out of 137 countries and economies covered, the Philippines ranked 56th overall. And of the 12 pillars of the GCR, the Philippines scored high in pillar #2 Macroeconomic environment (22nd) and pillar #10 Market size (27th).

But the country scored very low in three pillars: #1 Institutions (Irregular payments and bribes, Favoritism in decisions of government officials, Burden of government regulations, Reliability of police services…); #2 Infrastructure (roads, railroads, ports, air transport,…) and #6 Goods Market Efficiency (Extent of market dominance, Effectiveness of anti-monopoly policy, Number of procedures to start a business, Time to start a business, Burden of customs procedures), (see table).

There is a direct relationship between a competitive economy and its prosperity, and given the relative smallness of the Philippine economy, what seems to be “big” corporations domestically can be small or medium-size compared to the corporations in our East Asian neighbors.

The PCC checks and prohibits three major acts and behavior: (1) Anti-competitive agreements like price fixing/collusion, bid rigging, output limitations, and market sharing; (2) Abuse of dominant position and market power like predatory pricing, discriminatory pricing, exploitative behavior towards consumers and competitors, and limiting production, markets or technological development; and (3) Mergers and acquisitions (M&A) that restrict or lessen competition in the market.

These point to two important issues.

One, the PCC is concerned only with behaviors of existing competing players but does not cover behaviors of state-created monopolies.

And two, many of those behaviors rendered “anti-competitive” are generally short-term and never long-term, so the imposition of penalties may be a question mark.

Take price discrimination or “price differentiation” and “market segmentation” in economics. This is perfectly normal in market competition as the supplier is optimizing revenues from customers with different needs and different budget or resources. Thus, higher prices are set for those deemed wealthy and lower prices for those financially struggling.

In price fixing/collusion, players here may be digging their own graves as they antagonize customers and invite new players that can quickly provide the goods and services at lower prices. If this happens, the collusion can quickly break up and the old players would try to secure their previous market share eaten by the new player/s.

Competition requires innovation, lots of it in terms of product and service quality, variety, marketing and pricing. Player X’s prices compared to its competitors would look “predatory” yesterday, “collusive” today, and “excessive” tomorrow and these are all fine. Those prices can roller coaster at temporary and short-term durations. New players would tend to give low introductory prices to attract many new customers while innovators would tend to give high prices to recoup their high investments in product R&D, consumers survey, and marketing/promotions.

According to the WEF Executive Opinion Survey 2017, the “Most problematic factors for doing business” in the Philippines are: (1) Inefficient government bureaucracy, (2) Inadequate supply of infrastructure, (3) Corruption, (4) Tax regulations, (5) Tax rates, and (6) Policy instability.

So, is the PCC a facilitator or hindrance to overall business competition in the Philippines?

For me, it’s a tie.

The PCC can be a potential hindrance because its long list of prohibitive acts can be additional deterrent to potential players that are already wary of the corrupt bureaucracy, government-created monopolies, poor infrastructure, high tax rates, and policy instabilities.

But it also has two important functions that can facilitate competition.

One, it gives information to potential and incoming players on how they will be treated in case existing players, foreign and local, will charge and accuse them of “anti-competitive” behavior. And two, it can coordinate with other sectoral regulatory agencies and temper their itchiness to regulate, restrict and prohibit as PCC has the overall view of the degree of competition in the country.

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See also:

BWorld 206, Intellectual property rights in East Asia, May 09, 2018 

BWorld 207, Fare control and surge cap are wrong, May 10, 2018 

BWorld 208, Consumer choice in electricity supply and prices, May 11, 2018

BWorld 207, Fare control and surge cap are wrong

* This is my column in BusinessWorld last April 23, 2018.

 “The consumers force all those engaged in production to comply with their orders…. It makes competition work. He who best serves the consumers profits most and accumulates riches.”

— Ludwig von Mises,

Economic Freedom and Interventionism (1990).

Market competition is good. It gives consumers more options and forces competing players to adjust to their varying demands and wishes.

However, several government regulations — such as price and fare controls — go against this principle because it discourages companies from introducing innovation.

When Uber pulled out of Southeast Asia and decided to merge with Grab, it was simply exercising its prerogative. After all, the company, or any company for that matter, can freely enter or leave a market on its own.

Uber has helped popularize technology-based ride-hailing in the region and has inspired Grab and emerging players to do the same, and even improve on the technology aspects of the business.

What should worry the public, especially the commuters, is when government — via the LTFRB, DoTr — decides to bureaucratize the emergence of new players by imposing new regulations like fare control via cap or ceiling on price surge, among a host of other requirements.

Grab as the surviving big entity cannot and should not be considered as “monopoly.” After all, regular cabs, airport taxis, and hotel cars remain available.

If commuters really want cheap rides, they are free to ride buses, jeepneys, and UV expresses.

The price surge in exchange for availability of cars when they are most needed is a trade-off that many Filipinos and Southeast Asians can accept.

Here are four reasons why.

First, people in the region have rising income and therefore, more people have the ability to pay for more expensive trips in exchange for convenience, comfort, and safety.

These numbers show two things: (1) car sales are high and are rising further (except in the Philippines which implemented increased excise taxes on cars due to TRAIN), and (2) per capita income is either high (Singapore, Malaysia, Thailand) or at medium level but the expansion is high, 30-38% in just five years (Indonesia, Philippines, Vietnam).

Two, the price surge is an incentive for drivers to go to “inhospitable” areas. A person living in a very congested neighborhood but has to bring a family member to hospital emergency may not bother paying a price surge 10x or 20x because it is a matter of life or death for the loved one. And it is possible that the driver may not even charge at all if he/she sees the condition of the patient and have pity.

Three, the contracting system by taxis is a form of a price surge, an incentive for the taxi driver to pick up passengers despite heavy traffic, or flood, or late hours of the night or wee hours of the morning.

Many passengers would agree to pay for increased fares so long as they reach their destination safely. The LTFRB cannot track price surges by taxis but can check price surges by tech companies and this is where agency harassment is most pronounced.

Four, an expensive dominant player is good news to new and upcoming players. They might have a big volume of instant customers if they can initiate and offer lower prices for the same level of convenience and safety.

In a similar case, a friend who runs a UV Express made this observation.

We at the UV Express side are experiencing purging. Transportation is a very good source of livelihood but up to now government does not open any franchises for the transport sector. “Colorum” vans and operators are treated like criminals with a shoot order. All these operators and driver want is a decent job. Government does not have an alternative solution to incorporate returning OFWs who use their hard-earned money to buy cars or vans hoping that government will open new franchises to do business in the country. Government treats would-be small businessmen as criminals since it prevents the people the opportunity to be legal.

A government-imposed price and fare control is wrong. Its move to restrict franchises is wrong. Government should encourage more players and competitors per sector or industry, not less. Regulations like fare control and franchise control can discourage more innovative entrants. The government should give commuters more options as to which players to use and support.

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See also:
BWorld 204, Mining attractiveness index and the Philippines, April 30, 2018 

BWorld 205, Energy mix and wishful thinking, April 30, 2018 

BWorld 206, Intellectual property rights in East Asia, May 09, 2018

Transport Econ 22, Uber's merger with Grab

On Uber merger with  Grab in SE Asia (not just PH). It is business prerogative to enter a market and make money, it is also business prerogative to exit a market and pull out its money. Should be no big deal for us.

I think it is Uber HQ's decision in the US to pull out partially or fully (someday) from SE Asia. Why, perhaps they just want to get their money and put it elsewhere, maybe strengthen their US and Europe presence. It's their capital.

What should worry us is if government -- via the LTFRB, DOTR -- will bureaucratize a new PH tech company/ies that will rival Grab. Uber is US-based, Grab is SG-based. Perhaps it is time for a PH-based tech company to venture in this business.

My advice to friends who use the "Duterte/LTFRB harassment of Uber then merger with Grab", maybe Yes but very likely No, so don't pursue it. I think this is a purely business decision by Uber HQ. The good thing is that Uber has inspired many local businesses here to copy their model, improve on it then dream big.

Capitalism always encourages innovation. The bigger innovation would be how to baffle the LTFRB bureaucrats here so that a tech company won't be harassed and treated as a regular taxi company.

Uber HQ by now may have realized that they did not factor in well how different the Asian transportation bureaucratics are compared to the US and Europe transpo bureaucrats. They may have to tweak their system then come back later.

Regular taxis are still the main competitor of Grab-Uber, so there is no monopoly. Taxis can also provide good service like cleaner cars and seats, more courteous drivers. But more than convenience, the main advantage of tech companies is transparency and hence, better safety. The passenger already knows the name and plate no. of the car that will pick him/her up, the same for the driver, he/she knows the name of passenger even before they meet. In contrast, taxis are known beforehand to LTFRB regulator-bureaucrats but not to the would-be passengers.

Reposting two items here.

(1) From my friend Vic M:
"It was a failure in the open market by the drivers, the investors in cars, the investors in the business. I'm for a safety net but not for bailouts.

The market mechanism is for reposession of the collateral. If an investor in cars for use in an Uber business model signed a cross-collateralization agreement, deficiency remediation provision, or worst, personal guarantee, then it was their stupidity to have signed those legal remedies. Why should anyone bail them out? Under the reposession case, the price of used cars will come down which may lead to lower brand new car prices as well. The consumer wins.

(2) 3 ride-sharing firms apply for LTFRB accreditation

March 29, 2018 | 12:04 am

By Patrizia Paola C. Marcelo, Reporter

http://bworldonline.com/3-ride-sharing-firms-apply-for-ltfrb-accreditation/

THE LAND Transportation Franchising and Regulatory Board (LTFRB) is currently processing the applications of three transport network companies (TNCs), which are expected challenge the dominance of Grab Philippines…. Lag Go, Owto, and Hype.

If granted franchises, the vehicles of the accredited TNCs will be part of the common supply base of 65,000 transport network vehicle service (TNVS) in Metro Manila.

Indonesian ride-hailing and online payment company Go-Jek earlier said the company aimed to set up operations in the Philippines this year.

“With the increase of supply base under one app, you should see allocation times get better because the density of cars across the map gets better. So it’s easier to allocate. So if it’s easier to allocate, the surge would not be as frequent as before,” Grab Philippines country head Brian P. Cu said said in a press conference.

Mr. Cu said they expect around 20,000-24,000 drivers from the Uber system, based from the master list of the LTFRB. The total merged number is estimated at 55,000-65,000 if all drivers from the Uber system transfers to Grab.
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See also:

Transport Econ 19, On taxi fare contracting, December 17, 2016 

Transport Econ 20, On traffic and road sharing, January 20, 2017 

Transport Econ 21, E-trikes halted, P455k each, June 08, 2017

BWorld 124, On Grab, Uber, traffic and LTFRB

* This is my article in BusinessWorld on April 11, 2017.

The sharing economy is among the wonderful new inventions as humanity innovates with more modern technology. Technology companies (not transport firms or hotels) now allow private motorists to transport passengers and private homeowners can take guests and visitors for a fee via Airbnb.

There are two major advantages of tech companies in land transportation like Uber, Grab, and Lyft. First, transparency between the driver and passenger/s.

Since both drivers and passengers have accounts with these tech companies officially called transportation network vehicle services (TNVS), they can identify each other -- using car model and plate number details -- even before the trip begins. As a result, problems like hold-ups and sexual attacks are minimized under this scheme.

Second, passenger convenience. Passengers need not bring a car and brave the traffic, look for parking later, and privately owned cars are generally cleaner than taxi and drivers tend to be friendlier than the average taxi drivers.

There is an interesting study comparing Uber, Grab and conventional taxis done last year by UP Civil Engineering graduate students and professor. The authors got 18 respondents for a travel diary survey and take trips for 30 days. Then they also conducted an availability survey to measure the number of available vehicles of Uber, Grab, and Taxi at a specified time and location. The study has six tables, I summarized the results for Tables 2, 3 and 6 below.

The numbers show the following:

1. Conventional taxis have (a) lowest ratings by passengers, (b) highest percentage of complaints, more than 3x that of complaints with Grab and Uber, (c) 2nd to Grab in trip rejections, and (d) lowest cost for 10 trips, though the difference is not high compared with Uber.

2. Grab cars have (a) highest reliability and availability of vehicles, (b) highest cost per kilometer, (c) lowest % of complaints but small difference with Uber, (d) longest booking time, mainly due to (e) highest trip rejections, 2x that of conventional taxis and 21x that of Uber.

3. Uber has (a) fastest travel speed, (b) lowest passenger cost per kilometer, (c) highest passenger ratings though small difference with Grab, (d) lowest booking time but also (e) longest waiting time before being picked up, and (f) lowest trip rejection, almost zero.

There seems to have some inconsistency in the Uber data: it has the fastest travel speed in kph yet it has the longest travel time to cover a slightly longer distance than those covered by taxis and Grab. Nonetheless, it is a good study, congratulations to the three authors.

Now the problem is with the government regulator, the Land Transportation Franchising and Regulatory Board (LTFRB).

Since July 2016, it has stopped accepting applications for TNVS.

As a result, recent cars that have registered with Grab and Uber since that temporary ban may be subject to state harassment.

The LTFRB imposes multiple bureaucratic requirements that involve around 16 to 21 permits from various government agencies. These include tax clearance from the BIR, business permit from DTI and LGUs, among others.

The usual requirements by Uber and other ride-sharing companies for their partner drivers are only four: having their own vehicle, a driver’s license, a background check, and insurance coverage for passengers.

One result of these multiple bureaucracies is fewer supply of TNCs drivers and cars compared to the big and rising passenger demand. Until end-2016, there were only around 7,000 Uber drivers in Metro Manila vs. some 682,000 registered Uber riders.

There is one important move that the LTFRB can do: rescind and reduce many of those multiple requirements to allow more Uber and Grab vehicles on the road, and make these fewer requirements be available to conventional taxis too. This may be done via administrative order.

If this will require legislation, Congress should heed the clamor of the citizens and passengers for safer, more convenient rides.

Government should learn to step back from too much bureaucratism and recognize the ingenuity and innovation of the sharing economy. Providing safe transportation to people who do not own cars or those who leave their cars at home is not a crime that should be slapped with multiple permits, fees and bureaucracies.

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See also: 

BWorld 121, The PH tax reform bill and tax policies in East Asia, April 10, 2017 

BWorld 122, Six more myths in the mining debate, April 13, 2017 

BWorld 123, Drug-related murders and criminal justice in Asia, April 23, 2017

BWorld 118, Regulate this, prohibit that: bureaucracies in transportation

* This is my article in BusinessWorld last March 14, 2017.

Traffic congestion is an engineering problem with engineering solutions, not bureaucratic solutions involving increased prohibitions.

The recent plan of the Metro Manila Development Authority (MMDA) to extend the car ban on EDSA to certain hours five days a week is very idiotic and arbitrary. Its plan is (a) the existing one day a week, 7 a.m. to 7 p.m., based on the last digit of the car plate, AND (b) on certain hours of the other four days involving an odd-even ban every two hours.

If there are problems, the first impulse of bureaucrats with dictatorial tendencies is to create ban-this-prohibit-that regulations and restrictions. If previous prohibitions failed, then create another layer of prohibitions.

Based on this new ban proposal, it doesn’t matter if the person has three or more cars because the prohibition is by the hour, not by the day.

Although some people adjust to traffic congestion by buying or renting a condo or dormitory room near their offices, others cannot simply afford that option.

The latter includes parents and guardians who bring their kids to school first then go to their offices and then pick up the kids later and head back to their house.

One day a week car prohibition on EDSA and many streets and cities in Metro Manila is already bad because it forces many households to buy a second car or motorcycle, which further raises the number of vehicles in the metropolis.

If one is caught in a long traffic due to accidents or road construction, one can lose the two-hour window and therefore be subject to fines, penalties, and extortion. And to think that the MMDA already gets huge allotments from taxpayers via their annual appropriation while they get more money from the public via endless schemes of fines and penalties.

More engineering solutions, not more bureaucratic “solutions of more prohibitions” should be pursued by the government. Consider the investments by other governments in big Asian cities.

In the table above, Manila is not included in the study but data from other cities should give us ideas how to provide more engineering solutions. Rail network here includes MRT (Mass Rapid Transit)/Subway/Metro and LRT (Light Rail Transit). The MRT systems in Singapore and Taipei are equivalent to Subway or Metro in other cities. Commuter rail is excluded (see Table 1).

Commuters in Tokyo rely more on rail-based system, those in Beijing rely more on buses. Commuters in Shanghai, Seoul, Hong Kong, Singapore, and Taipei use a good mixture of both. Although the data was collected in 2013, they still reflect current trends.

In Metro Manila, the three MRT and LRT networks are obviously insufficient to serve its 12 million residents plus an estimated four million people from nearby provinces of Bulacan, Nueva Ecija, Pampanga, Rizal, Laguna, and Cavite who go to Metro Manila almost daily for work, meetings and schooling.

If Manila is included in urban transportation comparison with big Asian cities, Manila will likely excel if the main metrics is the number of traffic enforcers and officers on government payroll, not the length of rails and multi-level roads (interchange, tunnel, skyway) constructed and properly maintained.

There are various options for urban mass transportation that the MMDA, LTO, LGUs and other agencies should consider, spend money there instead of hiring more traffic officers who will harass and penalize more motorists with various prohibitions that they have enacted (see Table 2).

The Bus Rapid Transit (BRT) is the cheapest system and has been proposed in both Metro Manila and Metro Cebu but only the latter seems to have prepared for it. MRT/LRT are more expensive but they are faster and can transport more people per hour than BRT.

In the short run, as in doable within a month, the government can consider the following:

1. Allow the current Point to Point (P2P) buses and vans to go to more destinations. Not just SM North to Makati City and Ortigas or BGC. Rather, allow them to pick up passengers from Pasig City, Marikina City, Taguig City, Malabon City, Navotas City, etc. and crisscross to more destinations.

2. Allow the air-con vans to pick up passengers from many subdivisions and villages to various destinations. Commuters will avoid riding tricycles and jeepneys, the most inconvenient urban transportation system and among the major reasons why many people drive their cars just to avoid riding these small vehicles.

3. Allow fare deregulation in buses and vans so that more transport operators will field more modern and convenient vans and buses. They can charge higher fares but lower than driving a car, riding a taxi or uber/grab car. Less modern buses and vans will be forced to charge lower to attract more passengers.

Government should allow, not prohibit, more market initiatives in providing both short- and long-term solutions to the traffic congestion problem. Make people’s commute convenient and safe, “one ride” as much as possible. And many people will leave their cars or motorcycles at home and jeepneys and tricycles will slowly die a natural death.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a Fellow of SEANET. Both institutes are members of EFN-Asia.

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See also:

BWorld 115, Centralization and federalism, March 23, 2017 

BWorld 116, Urban transport myths and the jeepney strike, March 28, 2017 

BWorld 117, Energy bureaucracy, electric cooperatives and NEA, March 28, 2017

BWorld 8, Manila's Traffic and Transport Woes

* This is my article in BusinessWorld Weekender yesterday.
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Metro Manila’s transport woes and the aircon-van alternative 

ELLEN is a senior accountant in one of the offices on Ayala Avenue, Makati City. She lives in Dapitan, Manila. Her father has a car that she can borrow occasionally and drive to Makati but she has little patience enduring the traffic congestion, then paying high parking fees in Makati. So she takes public transportation.

If she takes the regular transportation route to Ayala, that means three rides: jeep from Dapitan to LRT Tayuman Station, then LRT to Buendia Station, then aircon bus to Ayala. Total fare would be P35 but travel time will be between 1.5 and 2 hours one way due to the traffic and the inconvenience of walking and queuing to ride the train then the bus.

There is an alternative to multiple and inconvenient rides, the air-con vans. Only one ride from Dapitan to Makati, travel time is one hour or less, fare is P60 for the legal, franchised vans up to Ayala, and P45 for the non-franchised “colorum” vans that stop only at Makati Central Post Office, at the Buendia-Ayala intersection. To save money, she takes the “colorum” van, gets off at Makati Post Office, then walks two blocks to her office.

While the colorum van drivers can somehow deal with the “yellow boys,” officers of the Makati Public Safety Authority (MAPSA), they will have difficulty dealing with another bureaucracy, the “blue boys” of the Makati Parking Authority (MAPA) keeping watch on Ayala Avenue. These officers are often stricter and more inclined, shall we just say, to slapping penalties on both public and private vehicles.

SERIAL HARASSMENT

Being robbed in an air-con van by a fellow passenger is a possibility, of course, but that risk is minimal, compared with the risk of being robbed in a jeepney or on the streets, as one commutes from one ride to the next. It is also inconvenient, obviously, to be out in the streets when it is raining and the streets are flooded.

Queuing at Dapitan can be long, because of the many residents who commute to Makati where they work, and the number of aircon vans is not enough. Normally, Ellen would be in a queue for 30 to 45 minutes until a new, empty van arrives, but she prefers the relative convenience of taking only one ride in an air-con van.

Therefore, with or without a regular franchise from the LTFRB, those vans provide real public service to regular passengers like Ellen. She feels that her energy and work productivity are higher if she takes the van than if she goes through the three-ride system or drives a car.

Government officials have yet to acknowledge this view, going by the serial harassment of drivers of “colorum” vans -- who can avoid the harassment and penalties if they bribe the officers, but this “cost” is passed on to the passengers, naturally.

Ellen has noticed that a number of these colorum drivers are off-duty policemen or their siblings, even officers at the usual government offices, or barangay chairmen. She believes roughly one-third of these drivers belong to those categories. Asked how she knows this, she says these drivers show their IDs, and they have these unique hand signals that traffic officers recognize to spare these drivers from their usual harassment. This is what happens when you have an observant passenger on board, as opposed to a commuter who is lost in his headset or social media.

HARRIED EMPLOYEES

Makati’s Central Business District (CBD) is a premier area for the Philippine economy. Business groups surely recognize this distinction as sustained through the decades by their harried employees. Data from the city government’s website show that as of 2012, there are 472 banks, 3,279 insurance and other finance-related institutions, and 48 shopping malls in Makati. Data as of 2013 show that there are 41 PEZA-registered IT buildings, 47 embassies, 40 consulates, and 20 international organizations like the UN and its various offices located in the city.

These banks, hotels, shops, restaurants, malls, and other establishments employ roughly a few hundred thousands of people. Those employees, from the clerical to the managerial levels, need convenient transportation to be able to arrive at their offices promptly and render efficient work. Otherwise, employees beyond the frontline services may be spared the trouble of commuting to work, but many employers are still not open-minded enough to accommodate flexible time or work from home -- options that should ease Metro Manila traffic considerably.

This daily scenario is common everywhere in the National Capital Region, which, in the given year of 2013, contributed P4.29 trillion or 37.2% of P11.55 trillion in GDP. In the services sector in particular, 2013’s national output at current prices was P6.66 trillion, of which P3.49 trillion or 52.7% was contributed by the NCR.

The NCR’s registered population in 2013 was 12.5 million or only 12.8 percent of the total Philippine population of 98.2 million that year. But NCR’s weekday population can soar up to 15 million, as residents, including university students, from the neighboring big provinces of Rizal, Cavite, Laguna, Bulacan, and Pampanga would troop to the NCR to do various businesses.

The development of an integrated and efficient public transport system, as existing in developed economies in Asia and Europe, is the best long-term solution to Metro Manila’s traffic woes. That dream has been articulated for decades, until the gap in public transportation is now being filled by private initiative, to the chagrin of government.

The absence of an efficient and integrated public transport system in Metro Manila can be considered as due both to market failure and government failure. The appearance of air-con vans and other ride-sharing schemes like Uber is a market solution to such previous market failure. Government should not over-bureaucratize and over-tax these transport innovations. By stepping back from too much regulation and taxation, government effectively renders public service.

The services of air-con vans that provide workers and employees with convenient and direct public transportation, similar to school buses that transport students from their homes to school, are the next best thing for people who don’t or would rather not drive and brave the traffic. This is public service, providing an efficient, fast, economical, and safe car pooling system.

But when government agencies and their officers make the franchising system of air-con vans very costly and bureaucratic, many operators skip the franchise system and become “colorum” operators. To avoid the harsh penalties and regular harassment, they must bribe traffic enforcers, and this further compounds the culture of corruption in government. -- Bienvenido S. Oplas, Jr. 

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See also: 

BWorld 4, Public Transport, Colorum Vans and MAPSA, May 29, 2015 

BWorld 5, Transportation Bureaucracy and Uber, June 16, 2015 

BWorld 6, Biotechnology, Innovation and the Philippines, June 19, 2015 

BWorld 7, Free Trade vs.Protectionism via Non-Tariff Measures, June 26, 2015 

Fat-Free Econ 45: Newton's Laws of Motion and Traffic Congestion, August 11, 2014

Transport Econ 10: MMDA and Car Ban, July 18, 2013 

Transport Econ 11: On Fare-Contracting Taxi Drivers, December 13, 2013 

Transport Econ 13: On Prohibiting S. Luzon Provincial Buses to Enter M.Manila, August 30, 2014 

Transport Econ 14: On the MRT and LRT Fare Hike, January 06, 2015

BWorld 5, Transportation Bureaucracy and Uber

(This is my article last week  in BW Weekender)

AMONG the major complaints of passengers of regular taxis are (a) drivers who are choosy about faraway or traffic-congested destinations, (b) the risk of being mugged or molested by the driver as well as the general lack of safety, and (c) dirty or foul-smelling taxi units.

Uber, a technology-based system of ride-sharing, was introduced in the United States in 2009 and soon enough adopted in other countries. In February 2014, the company and its services came to Manila. What are the features, advantages, and disadvantages of this mode of transportation?

One, transparency and security -- as passengers themselves would attest to. Both passengers and drivers have accounts with Uber, somehow they know each other before the driver picks up the passenger. The passenger knows beforehand the model and plate number of the vehicle that will pick him/her up.

A passenger’s Uber account has the following information: the passenger’s full name, mobile number, email address, and credit card number. If the passenger doesn’t have a credit card, a debit card is also accepted. Partner drivers also have Uber accounts with information like full name, mobile number, email address, and bank account number, as well as vehicle information (brand and model, plate and registration numbers, etc.).

This disclosure of information should serve to discourage criminality either on the part of the driver or the passenger. There is also the system wherein the driver rates the passenger, among whom those reported to be prone to verbal abuse eventually lose access to the system. So only well-behaved passengers can avail themselves of the system and get a ride.

Uber’s system also serves to ease traffic and enhance mobility. A passenger need not bring his/her car, brave the heavy traffic, and worry about parking. Uber is a ride-sharing scheme wherein the motorist picks up a passenger going in the same direction.

From passenger observations, private-owned cars are generally cleaner than taxis, and their drivers, who are also subject to a rating system, are said to be friendlier. Another now-common compliment about Uber is that no passenger is turned down all because of the remote or traffic-heavy destination.

Yet the same service that encourages passengers to leave their cars at home may also aggravate traffic congestion with its network of vehicles, and this in turn prompts taxi operators keeping up with Uber’s service to expand their fleet. Moreover, cab operators are subject to stringent and costly regulations from which Uber so far has been spared. Also, there’s a premium to passenger safety and convenience, thus the perception that Uber somewhat more expensive compared with a regular taxi.

On May 10, the DoTC enacted a new order on “Promoting Mobility” that aims to modernize and improve transport services to the commuting public. Among the order’s guidelines and accreditation requirements for Uber and other ride-sharing services: passenger personal accident insurance; maximum vehicle age limit of seven years from the date of manufacture; one-year validity of accreditation; registration with the Bureau of Internal Revenue and provision of receipts to passengers; and an accreditation fee of P10,000 and application fee of P510 for the first two cars.

Meanwhile, a technical working group of the House committee on transportation wants these ride-sharing services suspended, amid the still-unresolved legalities over whether such services fall under “colorum” transport, among other concerns such as passenger safety and tax liability.

On the other hand, Uber’s patrons themselves have been critical of the many requirements by the Land Transportation Franchising and Regulatory Board for ride-sharing operations to be validated by transport authorities. But the government should step back from its customary bureaucratism and recognize this development in public transportation as filling in the sorry gaps in this very component of public service.

Bienvenido S. Oplas, Jr. heads a free-market think tank in Manila, Minimal Government Thinkers, Inc.

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See also: 

BWorld 1, PH Economy and Politics, Is there a Disconnection? April 24, 2015 
BWorld 2, Benefits of Trade Liberalization for the Philippines, May 16, 2015 

BWorld 3, UHC via Health Voucher System, May 23, 2015

BWorld 4, Public Transport, Colorum Vans and MAPSA, May 29, 2015

Transport Econ 11: On Fare-Contracting Taxi Drivers, December 13, 2013
Transport Econ 12: Bus Rapid Transit (BRT) and Tricycles, April 21, 2014 
Transport Econ 13: On Prohibiting S. Luzon Provincial Buses to Enter M.Manila, August 30, 2014 Transport Econ 14: On the MRT and LRT Fare Hike, January 06, 2015

BWorld 4, Public Transport, Colorum Vans and MAPSA

* This is my article today in BusinessWorld Weekender.
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METRO MANILA keeps expanding, in terms of rising volume and number of vehicles, malls, shops, residential and office buildings, schools and universities. Public transportation is a big problem both for people who live in the metropolis and those who live in the neighboring provinces.

While there are thousands of buses and three MRT/LRT train network existing and more are being planned, plus the proposed introduction of the bus rapid transport (BRT), they are not sufficient.

And even assuming for the sake of argument that the BRT and extended MRT/LRT are already in place, people still have to take multiple rides to reach their destinations. In particular, those who live in Las Piñas-Parañaque or Fairview/QC areas.

Here is what they will go through if they take the public transport system, one-way.

(1) Ride tricycle from the village/subdivision to secondary or primary roads;

(2) Ride jeep or bus to MRT/LRT/BRT station;

(3) Ride train/BRT to Makati or Ortigas or Manila, endure getting squeezed inside the trains or buses;

(4) Ride jeepney or van to final destination.

Four rides from house to office one-way, or three rides if #1 or #2 is eliminated. Going back home, another three or four rides in reverse sequence. If one is wearing corporate attire, and/or carrying a laptop and important documents and big cash, would he leave the car at home and endure the above 6-8 rides a day, 5 days a week?

Some would say Yes, but many middle class and rich people would say No. And that is why many people bring their cars or motorcycles everyday and endure the traffic congestion, limited and expensive parking, just to maintain their poise, or at least not be exposed to bus holdups and snatching in the streets.

And this makes public transportation very inconvenient, costly, and time-consuming. Riding a tricycle alone in formal or corporate attire looks unglamorous. And it is worse during the rainy season. The combined fare of those 6-8 rides a day would be equivalent to, if not higher than, buying fuel for the car. And that is why a “carless city” -- the next pioneering idea of city-living that is now the aspiration in Europe -- seems a far-out vision.

Another proposal made by various sectors is to have more bike lanes and encourage people to ride bicycles. It looks and sounds fine, but not everyone is physically fit to ride a bicycle. Or people are not willing to endure direct sunlight and smoke pollution from jeepneys and buses, or endure the rains and floods during the wet season.

There is an existing alternative to (a) multiple rides a day, (b) driving one’s car or motorcycle, and (c) riding bicycles -- the air-con vans.

They ferry passengers from residential areas to different destinations, particularly Makati, Manila, Ortigas, Fort Bonifacio, and other major commercial and business districts (CBDs). With just one ride, at most two, instead of three or four rides.

‘COLORUM’

One problem here is that getting a franchise for legal operation is very bureaucratic and costly. A friend who operates and drives a van told me that a franchise legally should be less than P50,000 total. But with bureaucratic procedures, it goes up to P200,000 to P300,000 per unit.

Check out, for instance, an online store of van franchises here.

With such high cost of getting a franchise, many van operators resort to the illegal operation known as “colorum.”

The same friend of mine who used to drive a colorum van for several years but now legal, told me the following, based on his experience.

One, for “colorum” operators, savings from getting a legal franchise is reserved as bribes to certain traffic enforcers. He said that the highest bribe he paid a few years ago was P1,500 for a first offense. Drivers avoid apprehension but sometimes they like to be apprehended because they get to befriend the authority. Next time they will not be apprehended. But traffic officers need some “karinyo,” token gifts like a bottle of alcohol worth P300-500 on their birthdays.

Two, these “colorum” operators cite four agencies they avoid: the Land Transportation Franchising and Regulatory Board (LTFRB), the Land Transportation Office (LTO), the Metro Manila Development Authority-Highway Patrol Group (MMDA-HPG), and LGU traffic enforcers.

And three, with the higher P200,000 fine for the colorum vans, bribes are now said to range between P3,000 and P6,000, or even more for a first-time offense. But if it’s a joint operation by those assorted enforcers with the media in tow, then, no mercy, the P200,000 fine will be slapped.

My office is on Buendia Avenue, Makati City, not far from the Ayala intersection. Every morning on weekdays, I see white vans unloading passengers in front of a building where I know a former senator lives.

These passengers would then walk to Ayala or Buendia, although some would ride a jeepney heading toward Ayala. I would assume that many of these vans are considered “colorum.”

While these vans were mostly tolerated in previous months, I noticed that over the past two weeks, there were frequent, sometimes daily, apprehensions by officers identified with the Makati Public Safety Authority (MAPSA) who would then issue tickets to these drivers.

Last Tuesday, May 26, I took photos of some of these MAPSA officers as they were issuing tickets to the van drivers. One officer, Rizaldo Capricho, did not like it, and soon he approached me and started arguing with me, saying I had no right to take photos of them without their permission. A Makati policeman dragged me to a van and I was brought to the Makati central police station.

There is no law in the country prohibiting people from taking photos of public officers in public places. There was no cause or justification for bringing me to the Makati CPS, and yet I was there. They could not file any charge against me, so I was out after about 25 minutes.

While it is the DoTC’s LTFRB policies that must be changed, to encourage and not restrict the expansion of legal air-con vans by reducing the cost and time of getting a franchise, I think LGU offices like MAPSA should be more considerate of those vans. They make no crimes, they render public service by bringing passengers to their destinations in just one or two rides, instead of the punishing three to four rides. The passengers are employees or clients of banks and other offices in Makati who pay various taxes and fees every year to the city government. These passengers are the very people who man the engine that is the Philippine economy.

To help address the daily traffic congestion and inconvenient public transportation system in Metro Manila, the DoTC’s LTFRB and LTO, the MMDA and the various city governments should learn to step back from often high-handed and bureaucratic procedures in giving legal permits to enterprises like air-con vans. Less cars on the roads, less harassed passengers mean higher work productivity and longer work hours. Which are translated to more economic activities, more job creation for the people of Metro Manila. The various national and local government offices also benefit in the form of higher business tax revenues.

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 See also: 

BWorld 1, PH Economy and Politics, Is there a Disconnection? April 24, 2015 
BWorld 2, Benefits of Trade Liberalization for the Philippines, May 16, 2015 

BWorld 3, UHC via Health Voucher System, May 23, 2015

Transport Econ 12: Bus Rapid Transit (BRT) and Tricycles, April 21, 2014 
Transport Econ 13: On Prohibiting S. Luzon Provincial Buses to Enter M.Manila, August 30, 2014 

Transport Econ 14: On the MRT and LRT Fare Hike, January 06, 2015

Transport Econ 13: On Prohibiting S. Luzon Provincial Buses to Enter M.Manila

The Metropolitan Manila Development Authority (MMDA) will soon prohibit buses from southern provinces to enter Metro Manila. Their analysis says that these provincial buses contribute significantly to Metro Manila traffic; thus, the solution is to ban and prohibit them from entering the metropolis. Is this a good analysis?

In July 2013, MMDA proposed a two days a week cars-not-allowed in M.Manila, from the current one day a week. Public adverse reaction was high and MMDA was forced to abandon it.

Then in August 2013, MMDA prohibited provincial buses from Cavite and western Batangas to enter M.Manila and forced them to stop at Uniwide coastal mall, supposedly to reduce traffic in MM. I and other observers suggested that it will only worsen traffic. Many of those bus-riding probinsyanos ("promdis") are car owners, so they will be forced to bring their cars from Cavite because it is now a hassle to take multiple rides. And MM traffic has worsened. See Fat-Free Econ 45: Newton's Laws of Motion and Traffic Congestion, August 11, 2013.

Now MMDA and other government bureaucracies will prohibit buses from S. Luzon to enter MM. Expect more cars from those provinces to enter MM and traffic will worsen. The law of unintended consequences will haunt those bureaucrats, and the rest of us. And I think MMDA will revive again the previous proposal of two days a week private cars prohibited in Metro Manila from 7am to 7pm.

The MMDA, some local government units (LGUs) and Land Transport Franchising Regulatory Board (LTFRB) bureaucrats always put the blame on others, never on themselves and their policies. Many of those current bus riders from Batangas and Laguna are car owners, but they opted not to bring their cars because it is more convenient by air-con bus to go to Makati, Ortigas or Quezon City. Especially if they are carrying a luggage, or a laptop and other important materials. It is convenient to get off at Cubao then take a taxi to final destination. Now people will take provincial bus + Manila bus + taxi or jeep, then repeat the process going back home. The inconvenience of multiple transfers.

Plus many Metro buses are generally less comfortable compared to provincial buses; they also travel slower as they make many stops. And Metro bus hold-ups are a continuing scourge that the government cannot solve until now. So expect some if not many of these promdis to bring their cars to MM and traffic will become even worse.

Bureaucracies always have knee jerk reactions to problems that very often, they themselves created. Their previous regulations and prohibitions are not working, they attracted the law of unintended consequences, so they create new prohibitions. The minds of central planners. Centrally plan things; since things don't work with old plans, make new plans, new prohibitions.

Another problem, LTFRB gives franchise to bus units to ply a particular route for about five years I think. Say it gave a franchise in 2013 for buses to travel until Cubao, to last until 2018. Then this year, 2014,  LTFRB dishonors the permit it gave by supporting MMDA prohibitions. Government makes rules then change these in the middle. Officials who have little or zero experience running a public transportation yet regulating and prohibiting public transpo.

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See also:
Transport Econ 9: MMDA Bureaucratism, May 27, 2013
Transport Econ 10: MMDA and Car Ban, July 18, 2013 
Transport Econ 11: On Fare-Contracting Taxi Drivers, December 13, 2013
Transport Econ 12: Bus Rapid Transit (BRT) and Tricycles, April 21, 2014