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Bus Transport Sector in the Philippines

CUTS-CREW

Philippine Institute for Development Studies

   Philippines

Population 92,337,852

Land Area (square kilometer) 343,448

Population Density (people/sq km) 269

Poverty Incidence (2009) 20.90%

Per Capita GDP (2011; current US$) 2,370Passenger cars (2010; per 1,000 people) 9

Selected Statistics, Philippines

Public transportation in the Philippines

Bus LRT 1 LRT 2

MRT 3 AUVs Jeepneys Tricycles

Transport and Storage

2008 2009 2010 2011 2012*

a. Land92,311 92,835 89,331 93,051 100,675

a. Water13,816 11,059 12,337 13,781 15,453

a. Air16,516 16,418 17,978 18,592 19,120

a. Storage & services incidental to transport 32,841 31,711 34,443 39,673 43,503

Total155,484 152,023 154,089 165,097 178,750

Gross Value Added in Transportation, 2008-2012 (million pesos, 2000 prices)Source: NSCB, PSY 2013

Percentage of Motor Vehicles, by Type (2008-2013) Source: LTO, NSCB PSY 2013

Year Number of PUBs

Total Number of Motor Vehicles

% share of PUBs to Total Number of

Vehicles

2008 49,381 2,181,3302.3%

2009 60,488 2,265,6432.7%

2010 55,674 2,682,6432.1%

2011 55,540 2,457,8742.3%

2012 40,787 2,216,9451.8%

Number of PUBs traversing Metro Manila (2008-2012) Source: MMDA

What is the state of competition in the bus transport sector?

What is the regulatory and institutional framework governing bus transport? How do they impact competition in the market?

What competition reforms have been implemented? How did the reforms affect:

the market structure? the welfare of consumers and producers?

Research Questions

Bus transportation – governed by the DOTC through its line agencies (LTFRB, LTO)

LTFRB – regulation of entry & exit, bus fares LTO – implementation of LTFRB & other transport policies MMDA, PNP, LGUs – other agencies involved in

implementation of traffic laws & transport regulations NEDA, DPWH – involved in planning and development of

road infrastructure & development policies Regulatory framework – complicated regime where

regulation and enforcement is shared by several agencies

Regulatory Framework in Bus Transport

Regulatory Framework in the Bus Transport Sector

Transportation Planning &

DevelopmentTransport Planning & Regulation

DOTCRegulatory

Policy SettingLTFR

B

Implementa

tionLTO

MMDA

PNP

LGUs

Infrastructure Planning & Development

NEDA DPWH

DOTC Department Order No. 92-587 (1992) Provided the framework for liberalization reform in

transportation including entry & exit, route-setting mechanisms, and fare regulation & adjustment procedures

Reforms imposing moratorium on issuance of new franchises or certificate of public conveyance (CPCs)

Moratorium on issuance of CPCs for provincial buses (2000)

MC 2003-028- nationwide moratorium on new CPCs (2003)

Reforms in bus transport

Analysis of Policy Reform

RouteNumber of operators

Number of buses

Average no. of

bus/operator

Manila EDSA Route 266 3,711 14Manila Non-EDSA Route 128 1,632 13Manila-Provincial North Bound 371 3,684 10Manila-Provincial South-Bound 357 3,568 10TOTAL 1,122 12,595 11

Study AreaAlabang-Fairview 21 341 16Baclaran-Novaliches 17 171 10Manila-Baguio 10 218 22Manila-Lucena 10 132 13TOTAL 58 862 15

RouteNumber of operators

Number of buses

Average no. of bus/operator

Manila EDSA Route 266 3,711 14

Manila Non-EDSA Route 128 1,632 13Manila-Provincial North Bound 371 3,684 10Manila-Provincial South-Bound 357 3,568 10TOTAL 1,122 12,595 11

Study AreaAlabang-Fairview 21 341 16

Baclaran-Novaliches 17 171 10Manila-Baguio 7 240 34Manila-Lucena 8 132 17TOTAL 58 862 15

Number of operators and buses, Manila Routes

The bus transport sector evolved from a highly regulated and concentrated market in the 1970s to a liberalized market composed primarily of small operators

The market operates under a highly complicated regime where regulation and enforcement is shared by several agencies resulting to implementation failures & regulatory capture

Operation of illegal (“colorum”) buses Proliferation of “kabit” system where a bus owner enters the

market through arrangement with an operator with established franchise

Market inefficiency manifests in too many operators and buses resulting to traffic congestion

Findings

Herfindahl-Hirschman Index (HHI) , where si is the market share of firm i in the

route, and N is the number of bus operators. The higher the HHI is compared to 1/N, the less competitive is the bus market in the route

Suggested classification: Substantial competition: Mild competition: 1.4<

Market Structure Indicator

Route HHI 1/HHI (a)

Number of operators(b)

Level of competition

Alabang-Fairview

0.087 11.5 21 substantial

Baclaran-Novaliches

0.070 14.3 17 substantial

Manila-Lucena 0.220 4.5 8 substantial

Manila-Baguio 0.405 2.5 7 substantial

Market Structure of the Bus Transport Sector, Study Area

Secondary Data Price data, fare changes Time series data on market structure Data on substitute modes of transportation (MRT,

LRT fares, ridership & cost of operation) Primary Data

CUTS-CREW matrix

Next Steps: Data for Further Analysis

Appendix Slides

Metro Manila Bus Route Network