The rationale of public transport subsidies

I got a lot of reactions to our article last week on “why public transport subsidies matters.” I guess the idea of government subsidizing transport is still strange to most of us, although it actually has been going on for a long time all over the world and even in this country.  It’s mostly limited to rail transport, though, as everybody seems to agree that rail is so expensive there’s no way for private sector to do business in it and gain a profit, without government chipping in on the costs.  All rail systems are subsidized, we always say.  Except Hong Kong’s MTR, many will add.  But even that is still debatable.

Let’s review first the case of economic viability versus financial viability, something I have written about a few years back.  All businessmen and most people know you go into a venture to gain a profit, not to lose.  If you’ll lose, you won’t go into it.  That’s just the way it is.  But some “ventures” are public necessities – schools, transportation, hospitals, etc.  Government must establish these, by itself, or allow private sector to do so, if profitable.  If not, government needs to subsidize.

Mobility, or transportation, is something which is essential – non-negotiable.  Transportation moves people and goods, but more so with people, who runs the economy.  The lack of transportation disables economic production and imperils the nation, so it must be provided at all costs.  So, when it becomes “financially” non-profitable to the private sector, the government has to subsidize.  But even when it does, the economic benefits are surprisingly much higher than the economic costs.  That’s how important transportation is.

Process this – our public roads (unless tolls are collected!) have no financial viability and are even total financial losses – it is pure subsidy!  Oh, you claim, “oh, how about the road user’s tax?” That’s not even 1% of the costs of all the roads the government built.  And everybody’s using them for free – bicycle, motorcycles, cars, vans, jeepneys, buses, etc. That’s pure subsidy.  But when you compute the area of road-space used by each mode, by each user, and distribute the subsidy equitably, we will find out that the most subsidized mode of transport and by a very big margin over the others, are the private cars.

Our government has been subsidizing LRT-1&2 and MRT-3 for decades in the billions of pesos.  I won’t mention spatial equity here, but on modal equity, other forms of public transport were not, save for the small road space, that it shares with all other modes on what is left over from the space occupied by private cars. If an LRT/MRT passenger can get a P2,000 subsidy per month (a value I estimated back in 2013), why can’t we now subsidize jeepney and bus passengers who will be terribly affected by the social distancing protocols as a result of this Covid-19 pandemic? The only issue is how.  But that it should be done should already be a done deal, for policy formulation, setting up of a system, and execution.