Inflation, fare hike petitions, and TNCs competition

The Duterte economic team aka “Dutertenomists” composed of the DBCC, the Secretaries of DoF, DBM and NEDA and Governor of BSP have been peddling the “6.7% inflation rate will be the peak” statement after the September inflation was announced. They are daydreaming, of course.
Not included in their calculations and projections is the granting of huge fare hikes for public land transportation any day from October to December. And this will have a big inflationary pressure in the last three months of the year.
Here is a summary of various fare hike petitions that I gathered from various sources. The provincial air-con buses seem to have a minimum fare of P50 to encourage many short-distance passengers to take the non-aircon ordinary buses instead. The last fare hikes granted by the Land Transportation Franchising and Regulatory Board (LTFRB) were March 29, 2011 for Metro Manila buses and December 15, 2008 for provincial buses.

Not included in these fare adjustments are under-recoveries for zero fare adjustments in 2018 nine months alone, and 12 months of 2017.
The LTFRB is among the dinosaur agencies, outmoded 1960s thinking bureaucrats who still think until now that fare adjustment is a function of politics and bureaucracy, not of changing world oil prices, peso exchange rate, and supply-demand dynamics.
In the transport network companies (TNCs) sector for instance, LTFRB has been engaged in two forms of command and control policies: (1) franchise control (limiting or capping the number of franchise units), (2) fare control via surge price control to 2x maximum, and abolition of P2/minute, which it later retracted.
While TNCs fare control has been partially addressed, LTFRB has not lifted its franchise control, which may be construed as favoring the big taxi companies.
When Uber left Southeast Asia in April 2018, Singapore-based Grab became the dominant player in the region and in the Philippines. Shortly after, many new local TNCs sprouted in the country like HirNa, GoLag, Iparra, MiCab, Mober and U-Hop.
Now a new but big regional TNC player, Indonesia-based Go-Jek, wants to enter the Philippines. Most if not all local TNCs are worried when Go-Jek initiates a ‘price war’ as its entry promotion, which Grab can easily match.
Is Go-Jek entry good for the Philippine economy?
From the perspective of passengers and the public, the answer is Yes. This means more competition, more choices, shorter waiting time. Which means many car owners will consider leaving their cars at home and take any of the competing TNCs going to work, which can help reduce Metro Manila traffic.
From the perspective of local TNCs, the answer is No. The likelihood that they will be eased out and might go bankrupt is high. Unless they will consolidate and merge with each other, pool their capital and technology resources and possibly invite foreign investors and players.
From the perspective of dominant player Grab, the answer is likely Yes. This will dispel or disprove lousy accusations by the public and even by some government agencies like the PCC that they are a “virtual monopoly” and hence, must be constantly monitored if not be over-regulated and over-bureaucratized.
From the perspective of government, it is a mixed challenge. To accommodate a new big player and allow existing players to adjust and expand, LTFRB must lift the 65,000 cap for TNCs franchise, either double it or abolish the cap altogether. This will diminish the bureaucrats’ power to harass both TNCs and individual car franchise applicants but at the same time, they will be praised by the public for easing the supply gap of TNCs.
The fear of “more TNCs = more traffic” can easily be countered by the fact or possibility of “more TNCs = more car owners leaving their cars at home.”
The nationalism card or “have more local players, reduce foreign competition” does not hold water always. The Philippines auto industry is composed of 100% multinationals — Toyota, Mitsubishi, Hyundai, Kia, BMW, GM, Ford, etc. and we are okay. The same for buses, there is not a single local auto firm.
Bottom line, there should be more competition, more capitalism, and less politics and bureaucratism.
 
Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers
minimalgovernment@gmail.com