The case of financing the reform of informal public transport in the Philippines
14 December 2023 (Thursday) | 4:30 pm – 6:00 pm
Lingnan University, Hong Kong｜Zoom Online
Considered as the most ambitious program in the Philippines, the Public Utility Vehicle Modernization Program (PUVMP) requires transport cooperatives to replace their old jeepney with modern units. PUVMP promises to be game-changing in public transport provision, yet since its roll-out in 2017, the pace of its implementation has been very slow. One major pain point in the current implementation of the PUVMP is the limited access to financing by transport cooperatives. The ambitious program requires massive financing, and the government only provides very limited equity subsidies. Moreover, traditionally, for banks, lending to small cooperatives is high risk and low return, and thus it is not part of their portfolio. Without this financing, there is difficulty on the part of the transport cooperatives in securing the funds needed to purchase modern vehicles.
In this research, I examine the potential of service contracting (SC) in the mobilization of financing needed for PUVMP. A service contract is defined as an agreement between the public sector (e.g., public transport authority) and the private sector (e.g., transport cooperatives) for the latter to provide public transport services to the public in exchange for compensation from a government agency. I analyzed this potential from the perspective of transport cooperatives and from the perspective of lending financial institutions. Twelve transport cooperatives and three private banks were interviewed in this study. I found that service contracts can enhance the level of confidence of transport cooperatives to service debt. Moreover, from the perspective of banks, service contracts may enhance the creditworthiness of transport cooperatives by means of (1) Improving and stabilizing the cash flows of transport cooperatives; and (2) Expanding the risk tolerance of banks. This work presents a novel mechanism to mobilize financing from private banks for the reform of the informal transport sector.
Dr. Varsolo Sunio is a Science & Technology Fellow of the country’s Department of Science and Technology. He is also the Chief Research Fellow of the Science Engineering and Management Research Institute (SEMRI) of the University of Asia and the Pacific. He is a lecturer at the UA&P School of Management, where he teaches Business Analytics, Management Science, Operations Research, and Japanese language.
Dr. Sunio finished his PhD in Urban Management at Kyoto University in 2018 and completed his master’s degree in Industrial and Systems Engineering at the National University of Singapore in 2014. He holds an MS Physics degree from the University of the Philippines and a BS Physics with Computer Engineering degree from the Ateneo de Manila University.