Strategy for Public Transport Revitalization

The Reform of the Urban Bus Industry: Industry Structure, Planning, Regulation and Institutions

Richard MeakinLegal and Institutional Specialist

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Challenges• Falling bus ridership, increasing car and m/cycle use• Traffic congestion affecting buses – a vicious cycle • Private vehicle restraint is not politically feasible until

public transport offers an acceptable level of service• Must avoid escalating subsidy: buses must be:

– demand-responsive– efficient– value for money

• Consolidation of the bus industry is complex:– many stakeholders– well-entrenched– low cost/low quality equilibrium

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Key Constraints on Bus Industry ReformCurrent System Proposed System

Route permits & control card. Perpetual, no service obligations

Limited-duration contracts with performance standards

Fleet owned by individuals, organised into cooperatives No service obligations

Fleet owned by company

Setoran daily rental to drivers Drivers employed, paid a wage

Flat fares Graduated fares based on distance, service quality

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Opportunities • Jakarta (non-BRT) buses all recover operating costs from revenue.

Retain this key threshold. • Commercial operation and cost recovery imperative will impose

financial discipline and market sensitivity on planners, operators, regulators.

• BRT and MRT will adopt electronic ticketing– enables flexible pricing, data collection, secure revenue, passenger

convenience.

Promote a common ticket.• MRT ridership will depend on effective integration• Tendered contracts promote competition and demand-responsive• Operation by companies will:

– mobilize market incentives, management expertise, capital– enable internal cross-subsidy– enable performance standards– consolidate bus industry into a manageable number of clients

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Requirements for Successful Management of Urban Buses

1. A coherent and progressive policy with clear objectives and time frame

2. A manageable industry structure

3. An appropriate regulatory framework (laws, regulations, standards etc)

4. A capable institution for monitoring, planning and regulation

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Keberhasilan Pengelolaan Bis

Empat Pilar Keberhasilan Pengelolaan Bis

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Pillar 1 - A Coherent Policy

Keberhasilan Pengelolaan Bis

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Why Draft a Policy Statement?

• Encourages a formal, rational and comprehensive approach

• Successive statements enable a progressive, long-term, approach

• Notifies stakeholders and community of government’s proposals and provides a focus for consultation

• Difficult dilemmas require community consensus and support

• Guides day-by-day decision-making

• Discourages short-term, political expediency

• Government’s performance can be measured against its policy

• Promotes investors’ confidence

• Can develop common strategies for many cities - mutual learning

• Provides a basis for transport law

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The Mayor of London’s Transport Policy 2009

Fast ForwardCopenhagen 2003

Draft for Consultation

Examples of Urban Transport Policy Papers

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Does Jakarta have a Transport Policy?No specific policy paper

Policy can be inferred from a variety of sources:

Government publications:• Pola Transportasi Makro (PTM) 2007 - a transport infrastructure plan

• Grand Design draft 2010 - management principles, (not published)

Consultants studies:• JAPTraPIS* 2012 a transport masterplan, advocates bus industry consolidation

Laws and regulations:• Law UU 22 of 2009 on Transport

• DKI Perda of 2013 on Transport

Ministers statements and actions

DKI Transport Policy is not coherent, progressive

Still scope for short-term, ad hoc, expedient measures

Laws tend to pre-empt policy, most transport operations now illegal

* Jabodetabek Public Transport Policy Implementation Strategy’ (Japtrapis)

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Keberhasilan Pengelolaan Bis

Pillar 2 – An Industry Structure Amenable to Regulation, Responsive to Demand

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Current Industry is too Fragmented to Regulate Effectively – Must Consolidate

14,000 angkots2,200 medium bus1,600 big bus

• Each vehicle licensed separately by Route Permit and Control Card - no service obligations

• Each setoran vehicle is a separate business, must recover costs each day

• Co-operatives act as intermediaries • Illicit regulation fills the ‘regulatory vacuum’• Setoran separates owners from drivers • Nobody is accountable for service delivery

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Pillar 3 – A Regulatory Framework Appropriate to Industry Composition and Policy Objectives

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Some Principles of Regulation

• Operators’ incentives should align with policy objectives, eg to maximise ridership, respond to demand

• Competition is the most effective incentive

• Operators must be accountable for service delivery

• Some functions should be left to the operators: eg minor changes to fares and routes

• Severing the link between revenue and cost (eg by pay-by-km) requires complex management, financial accountability, and incurs a high risk of escalating subsidy

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Conditions to Attract Private Investment

Contracts must attract commercial, corporate operators with experience, qualified management and financial resources

Government must minimize risks:

– Risk of ‘unfair’ competition (low cost, low quality, no service obligations) from angkots, illegal modes, and government buses

– Risk of fare constraints for socio-political reasons despite rising costs

– Risk of congestion reducing bus productivity and efficiency

– Risk of imposing unprofitable service obligations

– Risk of high front-end investment (eg depots)

Contract conditions must give a reasonable assurance of cost-recovery over the life of the contract

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Best Practice in Commercial Contracts

• Minimum contract - one route. Can be area network

• Private companies with resources and management skills

• Operating under multi-year, fixed-term, contracts

• Service obligations with sanctions

• Competition for contracts

• Market incentives, some commercial freedom

• Cost recovery, no operating subsidy

• Fares to reflect market and costs

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The National Law Provides for Bus Reform National Law UU22 on Transport:• Encourages ‘healthy competition’ (198)• Main routes must be served by big buses (158) • Small buses may not operate parallel to big buses (158)• Operating right may be a limited-duration contract, or an

area network (174)• Contracts to be awarded by ‘selection or tender’ (174)• No individual may operate a fixed-route transport service

(139)• Fares for non-economy routes set by the operator (185)• Non-economy services may not be subsidised (185)• All public transport operators to comply with minimum

service standards, to be elaborated by regulation (198)• No Ministers regulations yet made under UU22

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The DKI Perda of 2013 – A Missed Opportunity?• Does not expand the reform provisions of UU22• Many matters left to Governor’s regulation • May subsidise passengers (conflicts with UU22)• Route or area contracts awarded by ‘selection’ or tender,

but 5-year Route Permits and 1-year control cards retained (97–106)

• Operators submit monthly performance reports (102)• Maximum age of buses 7-10 years (Art 51). Euro 2 (54). • Small buses to be replaced by large buses on expiry (52)• DKI government to ‘monitor and evaluate’ each bus route

annually (112) • Head of Dishub must evaluate the performance of the

transport system every year (205)

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Pillar 4 - A Capable Agency to Manage Reform and to Plan, Monitor, Regulate

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Key Roles of the Agency

• Manage the reform process• Plan

– Annual 5-year network, service and financial planning cycle – Coordination with other government agencies (economic affairs, land

use, infrastructure, police etc) – Draft transport policy and strategy

• Monitor– Monitor the performance of the PT system and all operators vs

demand, affordability, policy objectives – Introduce measures to address deficiencies in the annual plan

• Regulate– Procure transport services under contracts– Take measures to remedy deficiencies, improve performance– Maintain balance of supply/demand, revenue/cost/affordability

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• Established and defined by a regulation

• Governed by an appointed board

• Clear objectives

• Accountable for performance

• Some autonomy, within legal limits:

- revenue and expenditure

- staffing and conditions

- operations

Features of a Transport Authority

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• To procure public transport services using formal and transparent competitive procedures

•To coordinate and integrate several transport modes, eg to manage the modal share between bus and rail

• To coordinate transport strategies and financial arrangements between multiple local governments

• To provide political accountability for subsidies from public funds

•To concentrate limited resources – expertise and funds.

• To reduce opportunities for direct political interference in service provision

• To focus policy attention and funding on urban transport

• To coordinate the programmes of different departments responsible for different aspects of urban transport.

• Sometimes a condition of donor project funding to manage funds, ensure supervision and accountability.

Functions of a Metropolitan Public Transport Authority

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Steps in the Transition Towards a Jabodetabek Transport Authority

Phase 1 - Strengthen Dishub’s capability: – to plan, monitor, regulate– to manage the consolidation and reform of the industry

Phase 2 – Create a DKI Public Transport Authority based on the strengthened Dishub public transport division

Phase 3 – Extend the jurisdiction of the TA to Jabodetabek