FEF counters FDC’s view: Record speaks for itself

We advise Sammy Gamboa of Freedom from Debt Coalition or FDC (Opinion, 2/17/15) to please read our statement on train fare hikes (“Subsidy benefits mainly nonpoor riders,” Inquirer.net, 2/8/15) more closely:

1. Foundation for Economic Freedom (FEF) acknowledges that subsidies of public transport may be unavoidable. What we maintain is that the size of the subsidy should not exceed the difference between what is needed to fully cover the operating costs of the train system, and what is the “economic value” of that system. The latter takes into account the relative costs and benefits of alternative transport, as well as what the commuter is willing to pay.
2. It is both efficient and equitable that consumers should pay more for what they desire more. This is how a free market works, as reflected in market prices. Either Gamboa does not understand that, or else he has a hidden agenda against free markets.
3. How much the consumer is able to pay is another issue altogether. A general subsidy unfairly benefits not only those who need price relief, but also those who do not—e.g., the two-thirds majority of MRT/LRT train riders who are nonpoor. As an alternative, we might—for example—consider issuing discount vouchers only to those who are, and remain, certifiably poor.
4. Precisely to address Gamboa’s concern about the misuse of proceeds from a train fare hike, FEF made four specific suggestions to build public confidence in the hike. We are sure there are other suggestions that can be added to our list.

Lastly, and contrary to Gamboa’s bias against the private sector, our country’s experience with privatization, deregulation and liberalization of infrastructure and public services has generally been good—from airline travel to water to telephone service. The reader can simply compare, from memory, the prices, availability and reliability of any of these “public goods” before and after market-based reforms were introduced.

Even in an apparently problematic sector like, say, electric power supply, the problems really arise from delayed or incomplete execution—or even outright violations—of the required reforms: asset privatization through the Power Sector Assets and Liabilities Management Corp., open access through the Wholesale Electricity Spot Market, contestability, separation of generation from distribution, institutional reforms in the sector, and competent regulatory oversight.

The record speaks for itself.

—CALIXTO V. CHIKIAMCO, president, Foundation for Economic Freedom