FORMOSO, CHRISTOPHERECON401SUCase Study # 2 – Metro Rail Transit System in Metro Manila

“A developed country is not a place where the poor have cars. It’s where

the rich use public transportation.” – Enrique Penalosa, Former mayor of

Bogota, Columbia

I. Introduction

Metro Manila, battleground of more than 15 million people on weekdays who

brave traffic congested roads rushing to work with blazing speeds of 5 kilometers

per hour.

Car ownership has been rising at 4% per annum while additional road networks

currently standing at approximately only 5,000 kilometers has barely budged over

the years. Only 1% of Filipinos own cars yet they dominate up to 90% of roads.

In 2012, Japanese International Cooperation Agency (JICA) estimated that our

economy is losing P2.4 billion per day or P864 billion per annum due to traffic

jams while one of Rappler’s thought leaders estimates it at P48 billion annually

and another P380 billion in lost time. To put this in perspective, the whole Metro

Rail Transport System only cost around USD675.5 million or roughly Php 31

billion with today’s exchange rate of Php45.75.

II. Transportation System in Metro Manila

Filipinos who rely on EDSA for their daily commute have limited options. They

could A) purchase a private car or motorcycle, b) ride a taxi, c) take the bus, or d)

hop on the Metro Rail Transport (MRT).

The most comfortable and, as it stands, aspirational for most Filipinos way of

commuting would be to own a private car. The lowest cost option would be to

purchase a second hand vehicle and have it financed but get stuck with high

amortization, maintenance, fuel, and parking costs that it becomes not feasible

for most Filipinos.

The second and most expensive of public transports is the taxi. With minimum

fares at P40 that could easily run up to P300-400 going from Quezon City to

Makati City during rush hour, this option is not in the daily commute options of the

general public who are earning anywhere around minimum wage. On the flipside

it’s the fastest option to get from point A to B with the added benefit of private

space and comfort.

The third option is the bus. A regular bus ride along EDSA would cost a little over

P30 and take around 2 hours. The main advantage of buses on the other hand

are its varied routes that aren’t limited to a single line making it the second best

option for the low to low-middle class Filipino.

Costing only P28 at its maximum range and taking only around 30 minutes transit

time, the MRT, our last option, is clearly the best option for the daily commuter. It

might take another 30 minutes to an hour of queuing time but is still much better

economically than riding the bus.

As with any system, it is only as good as its weakest link. I’ve chosen to focus

this paper on the weakest link in our transport system, that I believe to be is the

MRT. Given how much room for improvement the MRT has to accommodate and

improve the lives of the most daily commuters, it deserves the amount of

attention it gets in the media and more.

Despite being the only government operated of all the public transportation

options mentioned above, it is also in my opinion the advantage which private

sectors should consider as there are no set private groups that have a monopoly

over rooted industry practices.

III. The Metro Rail Transport System

The MRT is 16.9 kilometers long with 13 stations spanning the main arterial

highway of the metro, Epifanio de los Santos Avenue (EDSA). The MRT is the

result of the Build-Lease-Transfer (BLT) agreement between the Department of

Transportation and Communications (DOTC) and a consortium of real estate

developers forming the Metro Rail Transit Corporation (MRTC).

Under the BLT agreement the MRTC constructed and turned over operations to

the DOTC in exchange for annual equity rental payments of Php7 billion until

ownership is to be turned over to the government by 2025. Until then, it is the

responsibility of MRTC on to maintain technical operations.

The reason why ticket fares for the MRT are so low is because of the subsidy it

receives from the Philippine government. Initially it was done to compete with bus

fares and entice commuters to take the habit of using the system with prices

pegged at P10 to P15. Yet only this year have prices been raised since it

opened.

IV. Issues

With over 500,000 daily passengers relying on the MRT well beyond its designed

capacity of 350,000 passengers, safety and reliability has become a huge cause

for concern. Recent accidents with at least 48 injured passengers in 2014 alone.

And more frequent breakdowns of cars leaving only 5 working trains, compared

to 17-19 cars running on average during rush hours.

Despite the accidents, ridership has not slowed down. However, more frequent

breakdowns create immeasurable ripple effects to the productive economy

affecting traffic jams Metro-wide forcing commuters to take buses and other

forms of public transportation ill-equipped to handle sudden demand. This

directly contributes to billions of pesos in lost productive time of the Filipino

people.

Another gripe of passengers have been the long queue lines that can easily take

up to an hour just to buy a ticket and be able to hop on a train. Coupled with poor

crowd management, people expect pushing and shoving to be part of their daily

commute.

Another major issue is with price. According to President Aquino III, prices must

increase further as actual costs are between P45-60 per rider and all Filipino

taxpayers pay for this subsidy, which is unfair to those in the rural areas that

don’t get to directly benefit from this.

Also according to the DOTC, low ticket pricing combined with increasing

operational costs, all its lines have only been running at break even, not giving

them the opportunity to invest in large-scale improvements for its facilities.

Since opening 16 years ago, the MRT owns the same 73 Czech made rail cars

and have an inconsistent technical team due to short-term service contracts hand

by the DOTC.

Recently we have been hearing about efforts for an automated ticketing system

and new rail cars, but unfortunately even after more than a year has passed,

there still hasn’t been any real progress for commuters. The main reason I

believe is the way we see Public-Private partnerships. Given the sheer

magnitude of these projects, it’s expected to be riddled with issues but from a

different perspective, it also makes no “business sense” or from an operational

management standpoint to have only one supplier for your entire supply chain.

This was what was done with automated contactless fare management system.

The contract was awarded to a single consortium of business conglomerates.

And unfortunately, even after several delays, it has been postponed indefinitely

due to “technical and supply issues” without any timelines.

V. Conclusion

The MRT is a broken and tired system. Leaving politics and policy making out,

the issues that remain are mainly technological and resources management.

Fortunately these are what make private sector solutions the most effective and

these will be the type of solutions I will be focusing on below.

With the perspective of the DOTC as a customer and its riders as the consumers,

the best solution would come out of urging technology entrepreneurs to make

public alternative solutions and proposals to the DOTC’s true needs that itself

might not have considered.

For example, as an alternative to bidding out the automated ticketing system to a

single platform and applications provider, instead separate the platform

(hardware) from the application (software). These are two separate technologies

that need not be bundled together. Bidding out an open platform then creating a

separate application process for financial technology (FinTech) firms would be a

better longer-term solution. This has the single supplier benefit for the hardware

of uniformity and easy maintenance but also gives the consumer the power to

choose which e-payment solution is best for them. As a side effect, it creates new

opportunities for startup enterprises to compete against the big consortiums

spurring a new wave of innovation and choice for the consumer.

Another opportunity for entrepreneurs would be to create solutions for micro

problems for passengers such as long wait queues through smart data and

media applications. This has the potential of shortening commute times, overall

happiness and offload high traffic stations.

An example of this would be utilizing advertising spaces within and around the

stations to include real time information and advice which passengers might be

able to get new ideas for commuting routes in less crowded stations.

Another privatization program that I believe would be worth looking into is bidding

out all individual stations. Private companies would pay big premiums to secure

these prime properties and most likely do a better job in upgrading and

maintaining all of the station facilities. An added benefit and feature would be

having multiple owners of different stations competing for commuter traffic

potentially helping reroute commuters to using underutilized stations.

The last approach I would suggest would be taking from what spurred the new

space race. The Ansari X-Prize led by Peter Diamandis sought to spur new

development in the space industry by inviting private groups to develop new

space technologies and compete for a $10 million prize. Today, it successfully

created a new privatized space industry.

Tweaking the same model would be to gather enough capital commitments

through venture capitalists and/or crowdfunders to create a prize for private

individuals or groups present unique high impact pilotable solutions for the MRT

to win development and execution funding.

This type of approach would not only push for development in the MRT but spark

all sorts of other solutions that may be applied to other transportation systems

creating a potential butterfly effect of innovation despite the constraints of existing

political systems.

The solutions mentioned above are not unique frameworks that will solve all of

the MRT’s problems, as private sector solutions will more often than not be

limited to tackling issues outside of government control. On the contrary, given

enough support by fellow citizens other government agencies like the DOST and

LGUs, I believe we would be able to create new technology solutions to age old

problems.

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