PUVs in the Philippines

[ANALYSIS] The economics of jeepney modernization

JC Punongbayan

This is AI generated summarization, which may have errors. For context, always refer to the full article.

[ANALYSIS] The economics of jeepney modernization


Modernization promises many good things not just for passengers but also the drivers and operators themselves. But at the outset, expect that the main sticking point between the jeepney industry and government will be how to finance the new vehicles and other associated expenses.

This week I got to host Newsbreak Chats, one of Rappler’s regular programs, and talk to reporter Lance Spencer Yu who covered what was supposed to be a weeklong strike of jeepney drivers and operators nationwide.

But the strike lasted just two days, because jeepney organizations Manibela and Piston talked to Palace officials by Tuesday night and reached a compromise agreement.

At the same time, Lance told me that not too many people were on the streets in the first two days of the protest, since many schools chose to conduct classes online, and many workers also avoided the commuting hassle by working from home. This further diminished the effectiveness of the strike in terms of paralyzing transportation – at least in Metro Manila.

If anything, the transport strike did accomplish one thing: spotlight the jeepney industry’s problems, bringing them to the nation’s attention.

Transport strikes happened a few years before the pandemic, in reaction to the planned “phase out” of jeepneys, that is part and parcel of a broader PUV (or public utility vehicle) Modernization Program, affecting UV Express vehicles and minibuses as well.

But the severest disruption affects jeepneys, which trace their roots to the immediate post-war era. Essentially the jeepneys of old need to be replaced with modern ones which are objectively safer, more convenient, and cleaner for the environment. It’s high time for an upgrade.

Jeepney drivers and operators themselves are not totally against the idea, but they worry about the steep costs of buying these modern jeepneys, which are said to cost anywhere from P1.3 million to P2.6 million (estimates are all over the place). For drivers earning but a few thousand pesos per day, such cost is simply exorbitant.

Luckily, some jeepney manufacturers have already prototyped modern jeepneys, and have actually gotten the nod of government itself. The challenge now is how to scale up the production of relatively cheap modern jeepneys. If you think of it, this whole push for modernization is an opportunity for government to revive our jeepney manufacturing industry – similar to what we had with Sarao Motors and Francisco Motors back in the 1950s. But is there any such plan in place?

Subsidies, consolidation

The government is offering to subsidize the cost of each modern jeepney: previously P160,000, but it can go up to P360,000.

Still, P360,000 is just 28% of the cost of a modern jeepney costing P1.3 million. Also, the P360,000 subsidy per modern jeepney will require a total subsidy of P64.2 billion –­ where will that money come from, given the currently huge budget deficit of the Marcos government?

But the spending doesn’t stop with buying the modern jeepneys. A 2021 study published in the Philippine Transportation Journal, regarding the piloting of jeepney modernization in General Santos City, showed that “several costs of modernization have been overlooked,” including some capital expenditures (like setting up slow charging stations, offices, and other infrastructure), and operational costs (like maintenance expenses and mandatory vehicle insurance).

What’s more, the government is requiring jeepney drivers to “consolidate” or form cooperatives or corporations. On the face of it, consolidation makes sense: modern jeepneys can be bought by such cooperatives or corporations, and members can chip in, pool their resources, and pay for the modern jeepneys (even take out loans) as a group.

But forming cooperatives or corporations is costly, too.

For example, each driver wishing to join a cooperative must shell out an amount as large as P20,000 to P40,000. Many lone operators can’t afford that amount and might ultimately decide to find another job instead (if they can still do so). A cooperative can also buy only so many modern jeepneys, which means that there might be too many drivers in a cooperative sharing too few vehicles – another threat to drivers’ incomes.

Remember, too, that jeepney drivers are still reeling from the crippling of their industry when the pandemic struck. Since the lockdowns, I personally saw groups of drivers lining Katipunan Avenue in Quezon City, behind the University of the Philippines, and they were literally begging for alms because they couldn’t drive and ply their usual routes.

It was only late last year that they began to recover, what with the reopening of the economy and the resumption of face-to-face classes. And now they’re expected to shell out huge sums for jeepney modernization.

Many jeepney drivers are also worried that modernization involves breaking away from the “boundary system” that they’ve gotten used to, and instead they will be receiving fixed salaries regardless of how many passengers they serve daily. Sure, this can reduce the need for drivers to drive recklessly in a bid to earn more money in a day, and also reduce road mishaps. But apart from regular salaries, maybe this jeepney modernization is also an opportunity for drivers to get social security and even health benefits.

Low-hanging fruit

All in all, modernization promises many good things not just for passengers but also the drivers and operators themselves. It’s not all bad. But at the outset, expect that the main sticking point between the jeepney industry and government will be how to finance the new vehicles and other associated expenses.

Of course, the Marcos government may want to go all the way and fully subsidize the modernization – just to end the conflicts once and for all. But remember that the government is incurring a huge public sector deficit: we’re spending beyond our means, and that’s the reason the Marcos government keeps borrowing huge sums from abroad.

But there could be low hanging fruit. For instance, think of the P203-billion estate taxes that the Marcoses still owe the government. That can fully cover the cost of 156,000 modern jeepneys (costing P1.3 million each) – already 91% of the 170,000 traditional jeepneys that government is eyeing to modernize.

Think about that. – Rappler.com

JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. JC’s views are independent of his affiliations. Follow him on Twitter (@jcpunongbayan) and Usapang Econ Podcast.

1 comment

Sort by
  1. CM

    The crux of the matter: ” … the main sticking point between the jeepney industry and government will be how to finance the new vehicles …”

    Money does make the world go around. You just need to look for it. I know where: in the pockets of the Filipino overseas workers and permanent residents abroad. They can invest in partnership with drivers or cooperatives. Or buy the vehicles outright and employ the drivers. The permutations of how to do it are many.

    There should be strong interest out there. Countless OFWs are tired of toiling away from home and would love to stay put if there is a steady flow of local income. Balikbayans, who are retiring here, would welcome additional money to supplement their pensions from overseas.

    The idea of crowdfunding overseas shouldn’t be dismissed. There are over 12 million overseas Filipinos that can help in the spirit of “bayanihan”. Just imagine if the 5.2 million Pinoys in North America (4.2 million in the US; 1 million in Canada) each gives US$50, you’ll have $260 million or PhP 14.3 billion raised! That’s enough to buy nearly 11,000 modern jeepneys at P1.3 million each. Or the money can be added to the government subsidy.

    Patriotic and generous overseas Filipinos, especially entrepreneurs, are everywhere. They will give more provided there is a credible mechanism to ensure that the money goes to where it is intended. Perhaps Rappler should take on this crowdfunding as a project.

Summarize this article with AI

How does this make you feel?

Download the Rappler App!
Boy, Person, Human


JC Punongbayan

Jan Carlo “JC” Punongbayan, PhD is an assistant professor at the University of the Philippines School of Economics (UPSE). His professional experience includes the Securities and Exchange Commission, the World Bank Office in Manila, the Far Eastern University Public Policy Center, and the National Economic and Development Authority. JC writes a weekly economics column for Rappler.com. He is also co-founder of UsapangEcon.com and co-host of Usapang Econ Podcast.