Insights on the Impacts of the Public Utility Vehicle Modernization Program 

After years of delays and extensions, the Philippine government will begin the implementation of the Public Utility Vehicle (PUV) Modernization Program this month. The program, led by the Department of Transportation’s (DOTr) Land Transportation Franchising and Regulatory Board (LTFRB) aims to gradually phase out the use of old PUVs and streamline the operations of PUV routes across the country. Formally undertaken in 2017, the program has been met with protests and criticism from members of the transport sector, especially jeepney drivers and operators.  

Nationwide strikes and several dialogues have pushed the target date for full PUV modernization by as much as three years. But with the current Marcos administration’s refusal to extend the deadline for compliance, jeepney drivers and operators fear that a transport crisis is looming. PSA breaks down the implications of the program, what stakeholders and lawmakers want to happen, and how businesses could assess the impact of the impending jeepney phaseout on their operations. 

The basics of the PUV Modernization Program 

The primary objective of the government’s PUV Modernization Program (PUVMP) is to replace traditional PUVs (including jeepneys, shuttle services called UV Express, and smaller vehicles apart from buses) with compliant units, generally referred to as modern jeepneys, in an effort to uphold the roadworthiness of PUVs and to mitigate the negative effects of carbon emissions from old vehicle engines. The program also aims to streamline the operations of major PUV routes in the country by requiring all PUV operators to ply a certain route to “consolidate” and form a single transport entity. This means that for each PUV route, there should only be one collective operator – a corporation or a cooperative – servicing that route. Consolidating these separate entities is considered the first step of the program; once a cooperative or corporation is formed, these entities can begin the process of acquiring compliant units for their operation. The deadline for consolidation was on December 31, 2023. 

The costs of modernization 

As of writing, the DOTr claimed that over 70 percent of jeepneys nationwide have been consolidated. The numbers for Metro Manila, however, are much lower. Government estimates are at 40 percent, while transport group PISTON claimed that over 74 percent of jeepneys in the region failed to either consolidate or join an existing consolidated entity. 

The biggest point of contention since the modernization program began was the cost of the entire process, namely the formation of a consolidated entity and the purchase of compliant units. Estimates are spotty and vary from source to source, but it has been reported that individual operators and drivers who wish to form or join a consolidated entity must pay somewhere between PHP 20,000 and PHP 40,000 upfront to cover the required capital formation. On top of this, each modern jeepney may cost anywhere from PHP 1.3 million to PHP 2.6 million. Drivers and operators consistently asserted that these costs are simply too much for them to cover, even with purported government subsidies of up to PHP 360,000. While joining a consolidated entity will allow them access to credit facilities, there are worries that the debt burden may be too much to bear, leading to the revocation of franchises and ultimately of the units themselves.  

The Development Bank of the Philippines and the Landbank of the Philippines also stated in early 2023 that the current costs of modern jeepneys only become viable at PHP 1.6 to 1.8 million per unit, with the condition that each unit will be used by two drivers operating for one straight month to pay the unit off. To note, consolidated entities are required to have at least fifteen public utility vehicles. 

The LTFRB has made some concessions on the units, such as allowing roadworthy, rehabilitated jeepneys to still operate. However, rehabilitating a traditional jeepney may still cost up to PHP 1.3 million as compliant engines are not available locally. While there are modern prototypes created by local jeepney manufacturers that have been approved by the government, a lack of capital means that manufacturers will struggle to scale up production and meet demand. 

Some studies reported that apart from the costs to be borne by public utility vehicle drivers and operators, the program will also be incurring large costs for the government. There have been concerns about sources of funding for subsidies given the government’s budget deficit, while operational and infrastructure-related costs are said to have been “overlooked.” Senator Imee Marcos also flagged the capacity of the sector to meet the demand for maintenance, noting that the Technical Education and Skills Development Authority is yet to offer training on the repair and maintenance of compliant engines. 

The deadline – and what happens next 

The factors outlined above were exacerbated by the non-extension of the December 31, 2023 deadline for public utility vehicle consolidation. Throughout the year, major transport groups PISTON and Manibela staged transport strikes protesting the deadline, primarily driven by the understanding that those who fail to consolidate or join an existing consolidated entity by the end of 2023 will have their franchises revoked. Analysts note that the effects of these strikes were largely cushioned by schools and some offices shifting to remote set-ups in anticipation of the strikes. It is therefore difficult to quantify how widespread the effects of an actual “phaseout” would be.

A few days before the deadline, some lawmakers called for another extension to assess the impact of the phaseout on the public. Senator JV Ejercito suggested the deadline be extended up until all major transport projects become operational. For his part, Senator Aquilino Pimentel III stated that the modernization program should undergo a legislative process to allow for public hearings and a majority vote.  

The LTFRB later issued a memorandum allowing unconsolidated jeepneys to operate under certain conditions, especially in routes where consolidation rates are low. These conditional provisions will only hold until January 31 this year, after which all routes will have to be serviced by consolidated entities in one way or another. However, unconsolidated public utility vehicles will not necessarily be pulled out from the streets immediately, and “due process” will be followed in addressing these units. 

There may be one last opportunity for those in opposition to the program – transport groups still have a pending petition filed with the Supreme Court demanding a temporary restraining order on its implementation. As of December 28, 2023, the Court has ordered the DOTr and LTFRB to respond within ten days. Until then, transport strikes are expected to continue, as announced by both PISTON and Manibela. 

Business impacts and factors to consider 

Whether due to persistent strikes or a phaseout, businesses should expect public transport to be negatively affected by the modernization program to some extent, especially in Metro Manila. Other modes of public transport will expectedly have to fill up the gap that will be left by phased out public utility vehicles, and it may take longer for commuters to get a ride. PSA believes that the business impact on firms will vary with both external and internal factors to be considered. 

Externally, the biggest factor would be the full implementation of the modernization program. Some transport experts have questioned the ability of governing bodies to police the operation of unconsolidated units beyond the so-called “grace period.” There is currently no physical difference between unconsolidated public utility vehicles that are considered compliant and those that are not. Experts added that should authorities find a way to distinguish among units, a lack of workforce may hinder effective enforcement. A decrease in operational vehicles is still expected, but the extent of that decrease may only be determined once the program is in full effect. 

Nonetheless, companies may begin assessing the potential impacts on their operations by conducting a survey or dialogue involving employees who take public transport. While government data on consolidated routes is yet to be finalized, businesses can map out where most employees are from and the routes that they usually take to work. Even an informal estimate can serve as a baseline of how employees might be affected. It may also be helpful to record the modes of transportation that employees use to assess which are most likely to be affected by an eventual phaseout of non-compliant public utility vehicles. From there, companies may outline measures to accommodate affected employees and ensure continuous operations.