Why public transport subsidies matter

Last week, we ended up with this statement: “Whatever it will be, transport subsidies will surely be necessary in the new normal.”  A subsidy is defined as a financial aid given to a sector, industry, or individuals, resorted to when a certain economic benefit is desired but may not be attained without it.  The best example would be a lighthouse, which prevents huge economic losses from sea mishaps.  But no private entity would want to build them, having no foreseeable profits.  So, the government has to subsidize.  Same as common vaccines – it is better for the government to spend than let people pay for them.

As vividly highlighted by this pandemic, people’s mobility is a vital ingredient to a robust economic growth.  Conversely, without mobility, the economy will take a dive.  While subsidies are seldom discussed when transportation plans are prepared, these are already embedded when rail projects are designed since these are highly subsidized systems.  Other public transportation like buses and jeepneys are not, although strictly-speaking, they do already have a tiny bit since they run on public roads for free.  As do cars!

As a matter of fact, cars are the most highly subsidized form of transportation, getting as much as 9 times of what road-based public transportation gets.  This truth is lost to most people, especially to car-owners themselves, who often complain of the traffic congestion allegedly caused by buses and jeepneys.  All the data and analyses will distinctly show that traffic congestion is primarily caused by private cars.  Experientially, if all people will have private cars, there would be no movement at all as traffic will be at a standstill; if all people ride public transportation, there would be no traffic congestion to speak of!

In other countries, public transportation is subsidized.  In 2020, Luxembourg became the first country in the world to make all public transport in the country (buses, trams, and trains) free to use.  I’m sure ultimately, other countries will follow.  But how do we translate this to our situation today?  Well, the pandemic pushed us to social distancing in the new normal, resulting in decreased capacities for buses and jeepneys.  It becomes unprofitable to operators and drivers, so fares have to be increased, causing undue burden to passengers.  Government has to step in and provide additional subsidies if this has to work.

This is not something optional.  The only question remaining is how?  Do we subsidize the fare or the fuel?  Do we give subsidies to the drivers or the passengers (maybe not to operators if they’re getting boundaries)?  Per passenger, per trip, or per day?  The better option is active government intervention through service contracting through availability payments, as most countries have, but are we ready for it?  We still don’t have the technical and institutional capability nor the experience to do this.  If the Cebu BRT was not blocked, we could have (we’ve got to start somewhere, the BRT would have been a good venue).  Ultimately, the government has to accept we’re into a new normal, and get ready for it.