The solution to PUJ modernization

“Mamatay kayo sa gutom” (“Starve to death”) is not the only alternative to the modernization of public utility jeepneys (PUJs).

Hands down, there are no arguments about the necessity of PUJ modernization. They are old, eyesores, smoke belchers, and irreverently driven; and they stop anywhere at will. These jeeps must be replaced and their drivers reoriented on road courtesy, to say the least.

We are fully supportive, on the other hand, of imposing the Euro 4 compliant models, because who would invest or risk money in a model that will be discarded soon because of environmental issues?

Besides, there is no legal impediment for the government to do it. It will be fully within the exercise of its powers to modernize the transport system for the greater good of the public.

But then, there is just no denying that the fresh capital outlay or amortization of the financed amount is simply unaffordable -- easily P30,000 needs to be coughed up every month per vehicle, in the name of modernization, apart from all costs of operations, without government subsidy.

This can barely be absorbed by the P1,000 daily boundary that every driver pays and that their operator makes. Making jeepney drivers pay for this is like taking food from their families’ tables.

In the current proposal by the government, operators will have to shoulder the purchasing of the modernized jeepneys that costs around P1.2 million to P2.1 million. If an amortization period of seven years is used, and the government subsidy of five percent is given, operators or owners will still need to shell out monthly payments of P25,000 per jeep. Apparently, the government has no intention of further helping the PUJ modernization program beyond the five percent subsidy, considering that it has even lowered the program’s budget by P447 million.

So if operators and jeepney drivers can’t afford it, and the government can’t afford to fund it, will the PUJ modernization be cut dead? No -- not if a PPP (Public Private Partnership) scheme can help it. It is available, and the existing Build Operate Transfer (BOT) law as framework can be used without further legislation.

The government, with the help of the PPP Center, can step up and craft a quick project study up for bid, public or negotiated, and the scheme can run this way:

Private sector partner (PSP) will supply the modern jeepneys to the drivers (and this can be financed by a bank or a consortium), where the jeepney driver will own the vehicle after fully paying the amortization. The PSP can be more than one, or can be a consortium.

To make this investment viable or attractive to the private sector, the PSP will be allowed to collect all passenger fares and it shall be responsible for paying the driver’s compensation plus incentives based on performance. This means the PSP can take advantage of the few days of float before amounts get disbursed for driver compensation, operating expenses, etc. If there are 170,000 jeepneys to be modernized and daily gross revenue (including driver fees and fuel costs etc) is just 1,500 per working day, then the gross amount of collection can total P5 billion to P6 billion per month.

An automated fare collection system (AFCS) similar to the Beep Card shall be used to course payment through a centralized payment system managed by the PSP. Passengers pay using a stored value card that they can buy at 24/7 convenience stores.

Since fares directly feed into the AFCS, the PSP now has the obligation to remit the drivers’ share of the farebox revenue, which may be deposited twice a month to the drivers’ bank accounts connected to the AFCS facility.

The PSP can augment its recovery (even profitability) by contracting advertising deals. Imagine just one product advertised on the jeepney’s large sides or roofs -- the brand recall from the hourly eyeballs will simply be immense. There could also be monitors inside the jeeps where ads can be played. Later on, jeeps can be electronic payment centers where passengers can digitally pay their multifarious bills.

Supplier contracts can be negotiated centrally and wholesale discounts on fuel and oil, and maintenance services can be taken advantage of.

Government need not give the five percent subsidy anymore or allocate more in the budget. Instead, they can give fiscal incentives (like income tax holiday) to the PSP until it fully recovers its equity.

A tripartite agreement between the Department of Transportation, the PSP, and jeepney operators or cooperatives can be the main legal document that will describe the obligation and commitment of the parties.

Can the government simply own the vehicles, run the transport system, and pay the drivers like employees? This has its advantages, and potential evils too. The thing is, the government’s war chest seems to be already fully dedicated to funding its existing Build Build Build projects. There just isn’t any money anymore for PUJ modernization.

It is time for the PPP Center to shine by coming to the rescue. If it can, then it will shine at its brightest -- for better public transportation, for the environment, and for some 200,000 jeepney drivers nationwide and all the lives they support.

*  *  *

Alexander Cabrera is the chairman of Integrity Initiative Inc., a non-profit organization that promotes common ethical and acceptable integrity standards. He is also the chairman and senior partner of Isla Lipana & Co./PwC Philippines. Email your comments and questions to [email protected]. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.