PUVMP: A failure of communication

Imagine that you are an office employee using an old computer for work. Your employer tells you that a switch to the newest computer model will yield a drastic increase in productivity, leading to better pay. Will you make the switch?

For most people, it depends. The pay increase has to be high enough to justify investing in the new computer. Fortunately, the increase in pay means that you will likely be able to recover the cost of the new computer in three years and still have more disposable income during the payback period than if you did not switch at all. Of course, the years after the payback is all pure profit.

Knowing all of this, the sensible move for most people is to make the switch. It would make no sense for pushback to exist when the move is a net benefit. Yet, such is the case with the public utility vehicle modernization program (PUVMP). Transport groups are on strike and #NoToJeepneyPhaseout is everywhere on social media. Civil society resistance against PUVMP is high. In particular, the claim that the program is anti-poor reverberates most clearly. Jeepney operators and drivers are being forced to take on debt to pay for the high cost of the modern jeepneys that their incomes cannot afford. Detractors claim that this is anti-poor.

Data from individual transport cooperatives do not share the same conclusion. Taguig Transport Service Cooperative basic data showed an increase in total operating income from nearly P587,000 to P806,000 after modernization. For drivers and operators, a 2018 case study on transport corporation 1-Transport Equipment Aggregator and Management Inc. showed monthly income increases. Operators earned about P3,000 to P6,700 monthly pre-modernization compared to P7,000 after modernization. Drivers show the biggest increase in monthly income from P10,000 to P16,000 pre-modernization to P23,000 after modernization.

As for the repayment of investment costs, a study in the World Electric Vehicle Journal estimated that the investment in modern jeepneys priced from P1.6 million to P2.2 million can be recouped within just three years. Modernized jeepneys also have a net present value of $3.138 million and yield a 490 percent return on investment.

The benefits of the PUVMP to drivers and operators are clear in the studies. Industry consolidation breeds economies of scale, leading to lower costs.

Herein lies the root of the problem. The government failed to communicate the merits of the PUVMP to the general public. There was very little messaging on how lower costs and increased revenues more than offset the required borrowing for capital expenditures. The payback period for the modernized fleet and the projected increase in the incomes of jeepney drivers and operators should have been provided in specifics.

Had the merits of the program been laid out more clearly, jeepney drivers and operators would have been more keen to switch to modernized vehicles. Cooperatives needed confidence to take on the debt necessary for modernization. Knowing the numbers would have helped with building that confidence, but the government fumbled communicating how easy it is to break even with the initial investment.

The outcome is the strong pushback from civil society which feels that the government is forcing jeepney drivers and operators into deep poverty for the sake of modernizing.

A libertarian argument can be made that it is wrong for the government to indirectly force drivers and operators to take on debt, even with full knowledge that the debt can be paid easily. But the incentives were more than sufficient to make jeepney drivers and operators switch voluntarily to modern vehicles. Had there been proper messaging of these incentives, the invisible hand of the market would have rendered the iron fist of government unnecessary.

While we were stuck with dilapidated jeepneys belching out obscene amounts of smoke, Europe and North America have moved to Euro-5 emission standards since 2009. We are only now moving from Euro-2 to Euro-4 with the PUVMP, but the move would have made us a step closer to the rest of the modern world.

The PUVMP would outfit public transport vehicles with various features including a global navigation satellite system receiver, free Wi-Fi, dashboard cameras, CCTVs, and an automated fare collection system. They are also made to be comfortable, accessible, reliable, environment-friendly, and sustainable. Dilapidated jeepneys would be a thing of the past.

The PUVMP is inherently a pro-progress policy and should have been seen as such. Instead, the common perception of it is anti-poor, mostly due to the failure in messaging of all the merits and changes the program would bring to the transport industry.

This whole episode brought lessons on how to bring a lot of unnecessary trouble with improper policy messaging. Hopefully, the government is taking notes.

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Julan Omir P. Aldover is a political science graduate from Leyte Normal University. He is an advocate for better economic education and has written for the Foundation for Economic Education, a United States think tank.