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The PH Government needs Bailout! Privatize MRT/LRT!

February 4, 2011

Reality tells us that it is the Philippine government that clearly needs a bailout! With impossible-to-be-paid foreign debt, more

Let him buy MRT...

Let him buy MRT...

welfare state beneficiaries, corruption and mismanagement, a number- if not all- government-owned and controlled corporations need to be privatized by the Aquino government. Just recently, the group of businessman Manuel “Manny” V. Pangilinan expressed intention to buy the government-owned Metro Rail Transit (MRT-3) operating along EDSA. Since MRT is allegedly not earning money and costing the government billions of taxpayers’ money, now is the right time to sell not only MRT but all public transit systems .

Consider this online report:

In a report published today, February 2, by Philippine Daily Inquirer, Pangilinan’s Metro Pacific Investments Corp. (MPIC) relayed their intention through a letter addressed to Finance Secretary Cesar Purisima and Transportation Secretary Jose de Jesus.

MPIC’s offer will be enough to bail out the government from its outstanding debt owed to MRT Corp. bond holders.

It will also enable the current administration to save a lot of money, which can be allocated instead to other projects in line with the government’s top agenda.

The proposal came on the heels of the government’s recent statement that they are considering the option of inviting a private firm to take over MRT’s daily operations, including the state’s debt obligation amounting to $2.6 billion.

Metro Pacific Investments Corp. has investments in hospitals, water services, electricity, infrastructures, and toll roads.

The news of MPIC’s interest in the rail transit business happened a week after another Pangilinan-owned company, TV5 network, publicly announced the construction of its new building located in Mandaluyong City. (CLICK HERE to read related article.)

Pangilinan said that the state-of-the-art establishment will consolidate TV5’s overall operations.

Choosing Mandaluyong City for its location is also a strategic move on the part of management since the city is positioned at the center of Metro Manila—making it convenient, particularly for the news team, to move around and relay the events happening around the capital.

Network President and CEO Ray C. Espinosa told members of the press after the groundbreaking ceremony held last January 24 that the company is looking to fund the construction of the establishment by tapping its own funds and soliciting financial support from outside.

“A large part of the invested capital is internally generated, meaning it comes from our beneficial trust fund. But there is also a portion that will be borrowed, now that we have this property in Mandaluyong and the management is investing in the building equipment we will be in a position to raise money on our own for a significant amount. Our target profitability is four to five years,” said Espinosa.

The MRT and LRT projects are the best proof that the government is not good at running almost everything. It is also the best proof that the government is the creator of all cartels and monopolies in the country by means of giving franchises, special privileges, subsidies, or grants to a select group of businesses that trade not goods but favors with our career politicians.

Since MRT and LRT are problematic from the very beginning and since they’re now showing the ill effects of big government, the new administration is now entertaining the idea of hiring private companies to operate and maintain the LRT 1, LRT2 and MRT lines to make them more efficient.

“We’re looking at ways to get the private sector involved in the LRT and MRT,” Undersecretary for rail transport Glicerio Sicat told the press.

“We may get concessionaires to do the operations and maintenance of the train lines, but we’ll continue to own the facilities,” he added.

We now know that the LRT lines 1 and 2 is currently run and heavily subsidized by the government in order to lessen the burden being shouldered by daily commuters.

The controversial LRT/MRT price hikes is just one of the many immediate effects of the administration’s economic policies. President Aquino stressed in his first State of the Nation Address (SONA) that his government will not impose new taxes, “level the playing field”, and limit government spending. In order to help alleviate the pressure on state’s finances, the government plans to implement the following: 1) fare hike, 2) privatization, and 3) expansion.

In my own opinion, the only possible solutions to this mounting problem are the following:

  1. The government must stop subsidizing MRT and LRT.
  2. Let the MRT and LRT impose price hike, if they wish to.
  3. Totally privatize MRT and LRT.
  4. Guarantee economic freedom.

All the four measures above must be implemented altogether and not through a piecemeal process. The only possible solution to the problem is total, complete privatization of all mass transit systems in the country. However, many people might argue that this would force the private owners of transit lines to charge their passengers a very high price per trip. The problem is the advocates of subsidy and “right to transport” are merely looking at one element. They forget to consider the following factors:

  • There are a lot of modes of transportation. In the Philippines, the possible alternative to LRT or MRT are jeepneys, FX, bus, and taxis. If, for example, the new private owners of these mass transit systems, charged their daily passengers P60 to P80 per trip, the people, being the end-users or consumers, have the right to choose among MRT/LRT, jeepney, buss, or taxi. Those who can’t afford to pay P60 per trip have the option to take a cab or a jeepney. From an economic perspective, what is clear is that if the private operators of MRT/MRT charged excessively, they might not last long, as there are other modes of transportation in Metro Manila.
  • The power of competition. In order to maintain and protect free-market competition in a free-market economy, the government must guarantee economic freedom and leave business players alone. For decades the government has been plowing billions and billions of pesos into our mass transit systems due to the notion that it has to help more than 500,000 daily commuters. But how about other sectors like the jeepney drivers, bus drivers, and taxi operators and their drivers and their families? Are they not part of our society?
  • Competition leads to innovation. There are possible ways for the new private operators of MRT/LRT to survive without charging too much. As stated above, charging their passengers a very high price would mean their own destruction. In order to survive, mass transit operators may lease or operate concessions at its stations. It may also enter into partnership with other businesses like malls, call center agencies, office building developers, etc.
  • Competition leads to lower transport prices. The presence of other transport players like jeepneys, buses, taxes and other possible competitors in the future would compel mass transit operators to lower their price tag so as to survive. The same principle also applies to bus, jeepney and taxi operators.
  • Taxpayers must not shoulder the transport expenses of a select few. This transport subsidy is one of the worst forms of injustice in our country today. The government steals from Juan in order to serve the welfare or interest of Pedro and Petra. Not all taxpayers have the chance or opportunity to avail of this kind of privilege. The government must put an end to this kind of injustice by stop subsidizing all transit systems in the country.

Indeed, there’s an urgent need to reverse this trend now. The government must look at every element involved in this issue. Government planners should not only look at the immediate effect of their proposed policy or its effect on a single group. Yes, it is true that privatization of all mass transit systems might cause some immediate negative effects, but in the long run all sectors would benefit from the long-term advantages of privatization.

RELATED BLOGS:

Privatize MRT, LRT; NO to State Subsidy!

What if They Went on Strike?

3 Comments leave one →
  1. Tophe permalink
    February 7, 2011 3:38

    “We’re looking at ways to get the private sector involved in the LRT and MRT,” Undersecretary for rail transport Glicerio Sicat told the press.

    “We may get concessionaires to do the operations and maintenance of the train lines, but we’ll continue to own the facilities,” he added.

    Ha! James Taggart is looking for help! If he wants help, he should let Mr. Pangilinan do the job. No intervention from the incompetent.

  2. November 11, 2011 3:38

    Its like you learn my mind! You seem to know so much about this, like you wrote the e-book in it or something. I believe that you just could do with some percent to drive the message home a bit, however other than that, this is fantastic blog. A fantastic read. I’ll certainly be back.

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