DOTr doesn’t want to admit that jeepney fare hikes are coming

January 7, 2024

by Sonny Africa

The Department of Transportation’s (DOTr) response to public fears of looming jeepney fare hikes is revealing for what they said and what they didn’t say. In the end, the real message is that the DOTr is not admitting to the public that the fares commuters pay will increase with modernization.

DOTr Secretary Jaime Bautista recently said emphatically “we strongly believe there is NO BASIS on [sic] the alleged Php50 minimum fare” and to defend this statement argued that “the Php2 difference did not change” between the minimum fare for traditional jeepneys and modern jeeps since the Public Utility Vehicle Modernization Program (PUVMP) started in 2017. Transportation cooperatives chair Andy Ortega supported this argument by explaining “ang negosyo ng jeepney has always been private… so walang difference [under PUV modernization] which is from private to pribado pa rin.”

There are some deep problems with these arguments that they gave. It’s also conspicuous that they’re not saying that fares won’t increase upon modernization – because, well, they know that fares will rise.

‘Modernization’ comes at a price

But let’s start with their counterarguments. To begin with, the DOTr’s focusing on Php50 as if anyone has claimed this will immediately happen is creating a straw man – it’s exaggerating a contrary position to distract from how they don’t have a solid argument for the main issue at hand. Jeepney groups, transport advocates and academics have already come out with various estimates of modern jeepney fares. Fares will inevitably be higher simply because the modernization of fleets and the consolidation of transport service providers raises the cost of providing transport, even considering economies of scale.

The minimum fare for traditional jeepneys was Php8 when the PUVMP was started in 2017. IBON Foundation, for instance, expects minimum fares at around Php15-25 for the next 3-5 years and then heading towards Php45-50 or more after this – not immediately but, certainly, in that general direction. IBON based its fare estimates on simulations of the cost per jeepney passenger under modernization taking into consideration: i) more expensive modern units (ranging from Php2-4 million); ii) more expensive repairs and maintenance net of fuel savings; iii) additional expenses for the required garage facilities and staffing; iv) additional expenses for organizing consolidated transport service entities (TSE); and v) profit premium for investors.

Resulting fare projections are seen as indicative even if there is substantial variation regarding route traffic, salaries and benefits, cost implications of different vehicles, and the range of overhead expenses.

‘Modernization’ commodifies transport

The DOTr needs to understand and acknowledge that the so-called PUV modernization fundamentally changes the character of mass transport in the routes jeepneys ply – and changes this for the worse.

Mass transport on jeepney routes is certainly privatized right now with no government support apart from the occasional fuel subsidy.  The sector relies on informal individualized service providers – the tens of thousands of small drivers and operators. After the all-important government fare-setting, it is in all other respects an ultra-free market at work. The barriers to entry are quite low and are basically just the cost of a traditional jeepney and, for non-colorum units, the various government franchise and registration fees.

The informality of the sector is why the take-home pay of jeepney drivers varies so much from Php400-500 a day to sometimes Php1,200-Php1,300 or more. As long as there is a driver and operator willing to accept low earnings at whatever fare is set by the government, then there will be a jeepney plying that route. The informality is also seen in how earnings can vary widely between and even within routes.

This is precisely what keeps fares so low – because, with such poor prospects for jobs and livelihoods in the rest of the economy, there is always that driver or operator willing to earn almost next to nothing. Put another way, it is the tolerance for such poor income and earnings by so many drivers and operators that keeps fares low and that keeps routes still busy with jeepneys.

Using the consistent Php2 difference between traditional and modern jeepneys is also a weak argument. More expensive modern units may be viable at current low fares on high-volume and high-earning routes but this is much less likely to be the case on other routes currently dominated by traditional jeepneys. It’s still the dominance of traditional jeepneys that’s keeping fares down.

All this fundamentally changes with so-called PUV modernization. Mass transport is still privatized and, on this point, the DOTr is correct – aside from being an admission that the government will still not become a more active direct transport service provider. But they should be more candid that it isn’t the same beast anymore.

Profit-seeking is anti-commuter

The industry consolidation aspect of PUVMP changes the market dynamic entirely. The barriers to entry are now much higher with 15 units being the minimum scale for TSEs as well as higher expenses for organizing the requisite TSE, overheads and franchise fees.

Under the traditional set-up, Php200,000-400,000 for an old jeep and perhaps Php10,000 for government fees and fixers might have been enough to get started. Under ‘modernization’ it could now be some Php30 million for 15 modern jeeps and reportedly Php600,000 for franchise consolidation including additional charges per vehicle.

These are most of all where the pressure for constantly higher fares will come from.

The ‘modernized’ fleet is simply more expensive. While economies of scale may result in some savings, it is hard to see this as being strong enough to completely offset the higher costs involved. For instance, an extensive and inexpensive system for repairing traditional jeepneys has developed over decades often involving much improvisation. However, maintenance costs will rise if this is prevented by the new proprietary technologies of modern jeeps.

The concentration of capital also introduces a much more aggressive profit-seeking element. Gone is the marginal driver or operator willing to run a route even at the low fare set by the Land Transportation Franchising and Regulatory Board (LTFRB). Instead, there are now investors looking for a return on investment that is comparable or higher than other business ventures that they can go into.

The DOTr and LTFRB set low commuter-friendly fares today because they know there are informal drivers and operators willing to operate despite such low earnings. Would they have the same attitude if these small drivers and operators are replaced by large corporations including, perhaps, large oligarch-backed corporations?

It doesn’t seem far-fetched to very soon be hearing high fares justified by the catchy but spurious argument that “The most expensive transport is no transport.” The government unfortunately has a poor record when it comes to privatized utilities and infrastructure. After decades of privatization, the country still has among the most expensive water and power in the region. Vacationers who traveled private tollways over the holidays probably still remember how pricey these were – and how profitable for their corporate operators.

What are among the other possible impacts of profit-seeking in the transport sector? Low-earning and unprofitable routes are at risk of being dropped if they are not cross-subsidized under higher overall fares. Individual drivers forced to convert into salaried workers will be put in the same wage-depressing and benefits-denying poor working conditions that millions of Filipino workers are in, as already experienced by some who have entered consolidation

Put the “public” back in public mass transport

There is certainly much to improve in terms of making public mass transport safer, cleaner and more convenient but ‘modernization’ through making transport profitable for private capital is the wrong direction. Relying on consolidated profit-seeking enterprises places most of the burden of ‘modernization’ on millions of commuters who will face fare hikes and route losses, and on tens of thousands of small drivers and operators who face joblessness or low wages.

The better approach is for the government to bear the biggest part of the cost of improving public mass transport. Doing this in the context of a national industrialization policy and a long-term view to developing the Filipino manufacturing sector would be even better.

This is categorically and unambiguously the only way to ensure the affordable fares, convenient routes, and cleaner transport that every Filipino deserves.