A Jeepney Modernization Detour: Can LGUs Steer Cooperatives Away from Financial Strain?
- TSE
- Oct 4
- 5 min read
The road to modernizing the Philippines' road-based public transport has been fraught with financial roadblocks, leaving many transport cooperatives teetering on the brink of collapse. The current model, which forces cooperatives to take on multi-million peso loans for new vehicles, has proven to be a crushing burden. But a look back at a less than successful (ADB's 2021 report) but ambitious government project, the ADB (Asian Development Bank) E-Trike Project, may offer a crucial detour: empowering Local Government Units (LGUs) to become the primary vehicle procurers, shielding coops from debilitating debt.
This is not the fix. But a proposed alternative that could be added to the planned reforms by the new leadership of the Department of Transportation (DOTr). The goal is to help the Public Transport Modernization Program (PTMP) from one of its biggest flaws: ignoring the business viability of the very people it’s meant to empower.
Lessons from The DOE-ADB E-Trike Project
To understand this alternative, we must first examine the Department of Energy’s E-Trike Project. Launched with the ADB, the initial concept was laudable. The plan was for the government to acquire electric tricycles and offer them to drivers through a “rent-to-own” scheme, managed at the local level. It was a model designed to ease the financial entry for operators into greener technology. The project administration manual describe the scheme:
The collected funds from the drivers and payment back to government will also involve three steps: (i) the drivers will pay a daily amount as part of the ―lease to own‖ scheme either to the e-trike office, or to a bank account or to a third party responsible for collection (this activity will be ―ring-fenced‖ from the LGU); (ii) the collection from the drivers will be used to pay the GFI; and (iii) the GFI will pay DOF’s Bureau of Treasury.
However, the project stumbled. The final implementation saw a drastically scaled-down program where a few thousand E-trikes were simply donated to select LGUs. The ADB’s own evaluation deemed the project “less than successful,” citing the prohibitively high unit cost and the failure to establish a sustainable, scalable operational model.
Yet, hidden within this failure is a valuable lesson. The project’s core problem wasn't the idea of government-led procurement, but its execution and the vehicle’s unsustainable cost. If refined, could this LGU-centric principle be the key to unlocking a more equitable and effective jeepney modernization?
A New Lifeline for the PTMP: The LGU as Co-Financier
Imagine a different PTMP framework. Instead of individual cooperatives navigating the complex world of bank loans, the city or municipal government steps in as the primary buyer. Leveraging its more superior financial capacity and borrowing power, the LGU could purchase modern PUVs in bulk, likely securing better prices and stricter after-sales terms from manufacturers thru public bidding.
These vehicles would then be leased to qualified and well-vetted transport cooperatives under a long-term, rent-to-own agreement. This should be guided by a business-sensitive route and transition plans under the PTMP planning, which shall set priority routes and phase-in strategies. The cooperative's responsibility remains where it should be: on operations, dispatch, maintenance, and providing quality service to commuters, AND PROMOTE TO THEIR COMMUNITIES PATRONAGE AND SHIFT TO PUBLIC TRANSPORT AS THE MAIN MODE OF MOBILITY.
Then, their lease payments to the LGU would go towards the amortization of the vehicles, eventually leading to full ownership.
This model fundamentally re-balances the scales. It shifts the immense financial risk from the shoulders of our startup transport workers enterprises or cooperatives to a government entity better equipped to handle it.
The Promise: A More Viable and Integrated System
The advantages of this approach are as follows:
Financial Viability for Cooperatives: This is the game-changer. By removing the upfront barrier of massive loans, cooperatives can focus on operational efficiency and promotion or marketing of public transport. The daily revenue pressures would be eased, allowing for more stable and predictable finances. As our recent article noted, no cooperative should be forced to modernize if its daily income per vehicle can't even clear amortization costs—a reality for many today.
Economies of Scale: An LGU purchasing dozens of units has far more bargaining power than a single cooperative buying, say, five or twenty units. This bulk procurement can drive down the per-unit cost of modern jeepneys, a critical factor that has plagued both the PTMP and the E-Trike project re-fleeting.
Seamless Integration with Local Planning: LGUs are already mandated to create a Local Public Transport Route Plan (LPTRP), among other local plans that has varying degrees of budget programming and industry/businesses impact. By also managing vehicle acquisition, they can ensure the number and type of PUVs are perfectly matched to the routes they designed, preventing the current issue of having too many (or too few) vehicles during off-peak hours—a direct result of flawed fleet sizing formula.
Strengthened Oversight and Standards: As the owner of the assets, the LGU would have greater leverage to enforce high standards of service, safety, and maintenance. This helps guarantee that the "modernization" benefits the commuting public, not just the vehicle manufacturers and suppliers.
Asset-Use Flexibility: This model offers flexibility in asset use, enabling vehicles to function as Public Utility Vehicles (PUVs) on cooperative and community routes, or as LGU shuttle/shared-use services on non-PUV days (or even hours). This was exemplified by the DOE-ADB E-Trikes deployed in LGUs, which notably served as service vehicles for essential workers during the pandemic when public transport was not in operation.
Acknowledging the Risks
This model is not a silver bullet and comes with its own set of challenges. Not all LGUs are created equal; some may lack the financial capacity or technical expertise for such a large-scale undertaking. There is also the inherent risk of politicizing the selection of beneficiary cooperatives, which could undermine the program's integrity.
Moreover, a well-defined and robust framework is essential to establish responsibilities for vehicle maintenance, insurance, and eventual replacement. In the absence of such a framework, the program risks being hindered by conflicts and declining assets. However, LGUs can gain insights from the experiences of other fleet management entities like the Army, Police, Fire Bureau, and especially, the formal city and provincial bus industry, which they oversee, though indirectly.
The Road Ahead: A Call for a Policy Pivot
The current path of the PTMP is leading to widespread discontent and financial ruin for many dedicated transport workers. It is likely to focus on vehicle replacement rather than system sustainability, despite having the best intentions.
The LGU-led, rent-to-own model offers a pragmatic and compassionate alternative. It is a system built on partnership, not predation. It’s time for the Department of Transportation and the LTFRB to seriously consider piloting other financing models. By learning from the past and empowering our local governments, we can steer the jeepney modernization program away from a dead end.
SafeTravelPH advocates for a real Phased Transition Program for the public transport modernization: with piloting of its various components from communit-based operational consolidation and cooperation, to transit network studies and rationalization, and fleet modernization. This will be discussed in an upcomig article.
