Unintended consequences

A two-day holiday for kids in school is a wonderful thing — for the kids. By the time you get to college, it’s still rather nice but by then you’re old enough to worry about what will be done to compensate for lost time. For adults in the real world, an unexpected holiday presents headaches. For school administrators, it requires revisiting the academic calendar, rescheduling exams, and other related headaches. For workers and bosses alike, it raises problems ranging from what kind of compensation is required by law, as well as lost opportunities and income due to diminished productivity.

As soon as the Palace announced it would respond to the PISTON (Pinagkaisang Samahan ng mga Tsuper at Operator Nationwide) jeepney strike by cancelling government work and classes on all levels nationwide last Monday, a business reporter immediately observed that one consequence would be no check clearing and possibly, the shutdown of financial markets for a day. This was in response to a terse statement from the Bangko Sentral ng Pilipinas (BSP) deputy governor that there would be no Philpass and BSP Treasury operations. Sure enough, the Philippine Stock Exchange (PSE) then announced there would be no trading, nor clearing and settlement at the Securities Clearing Corp. of the Philippines.

As it turned out, Monday did feature the PISTON strike but also news that a whole bunch of jeepney operators did not participate in the strike. Local governments in many places mounted ad hoc transportation services, complete with tarpaulins blaring the goodness of the mayors concerned, to ferry stranded workers. The Department of Transportation (DOTr), for its part, went on the offensive and pointed out that contrary to allegations by PISTON and friends, the planned PUV modernization scheme was not anti-poor due to the alleged high cost in procuring new vehicles.

In the first place, according to DOTr, a major component of the program is a financing scheme available to public utility jeepney (PUJ) operators and drivers who are willing to borrow money to buy new units. DOTr said the financial package for the acquisition of vehicles endorsed by the Department of Finance is actually “generous” with equity as low as 5 percent, a 6-percent interest rate, and a repayment period as long as seven years. It pointed out that bus operators applying for bank loans to acquire new buses currently saddle themselves with 20-30 percent equity, with an interest rate of 7 percent, and a repayment period of three to five years.

And there’s more! DOTr said it would offer a subsidy of up to P80,000 per vehicle to cover equity payment, which actually comes out to a bigger value because of zero or low maintenance costs for the first three years. In turn, this translates to higher earnings for the driver and increased confidence and capacity to repay the loan.

A financial analyst responded to this with a comment on Twitter: “[For] Modern jeepney lowest price P1.2m less 80k subsidy = P1.12m. At 6% p[er] a[nnum], 7 yrs to pay, monthly amort[ization] = P16,360. Is this affordable?” A response to this tweet said: “Poor ROE [return on investment] right? Moreso with traffic.” To which the analyst responded: “Very. Especially for drivers who will probably see a big increase in their daily boundary;” adding further that the cost of the new vehicles exceeded diesel Innovas marketed at P1 million.

The truth is, the present administration is on the horns of a dilemma: Something ought to be done but it’s not possible for government to either nationalize public transport or simply replace obsolete jeeps with something new without jeepney operators having to foot the bill. So only partial solutions are offered, such as offering loans to drivers and operators who are unwilling to take on debt. Not least for unproven vehicles that may or may not work as advertised. (Batteries? In a nation where brownouts happen for all sorts of reasons?)

The best that the Land Transportation Franchising and Regulatory Board could do in response to the whole thing was to trot out one of its officials to scream that the transport strike was a destabilization plot against the government. Except that, a strike by a minority of operators is nothing new. Why did it result in the shutdown of government nationwide, the cancellation of classes, and a day’s lost opportunities in the markets as well as a paralysis in business because checks couldn’t be cleared (after a weekend at that)? To top it all off, government excitedly decided work and classes would be called off for another day. Despite the suspension, the BSP operated PhilPass, which allowed the stock market to reopen.

Destabilization? As the Great Eagle Father himself likes to say: “He, who is the cause of the cause is the cause of them all.”