Traffic congestion, particularly in Metro Manila, threatens the sustainability of the current economic growth. The negative effects on productivity and efficiency, health and well-being, and environment are evident.
Widely quoted is the study of the Japan International Cooperation Agency, released in 2014, that estimates the economic cost of Metro Manila’s traffic congestion at about P2.4 billion a day. Worse, without effective government intervention, the economic cost will increase to P6 billion a day by 2030.
Filipinos who reside, work, or conduct various activities in Metro Manila are all affected by the traffic jams, and they constitute the plurality of voters. Although Filipino voters do not vote on the basis of a single issue, they will give greater weight to the day’s burning issues. Bad public transportation and traffic congestion are burning issues.
Solutions have been offered left and right. One proposal worth pursuing, though it will encounter political resistance, is adjusting the tax rate of the petroleum tax to inflation (more on this, later).
But other ideas are harebrained. I was shocked, for example, to hear President Noynoy Aquino float what he described as a “radical proposal,” which is a variation of the odd-even scheme. In this scheme, vehicles with plate numbers that end with an odd (or even) digit can only use Metro Manila roads every other day.
The truth is, the odd-even scheme has not alleviated the traffic congestion. Its unintended consequence has been the purchase of additional brand-new cars for the rich or the upper class and second-hand vehicles for the struggling middle class. The rich and the middle class have gained from the system. Having a new car to go around the odd-even scheme has become all the more affordable because of the intense competition among car manufacturers and dealers, the cheap loans, and the rising incomes of the middle class, especially for the many who benefit from the remittances of overseas workers.
There is another reason why the odd-even scheme does not reduce the volume of vehicles on the road. The use of a vehicle is but a means to transport people and goods to meet a certain objective. What cannot be achieved on one day will be done on another day. What someone cannot do on one day because her mobility is restricted by the car ban, she will do on another day. Everyone thinks and behaves the same way.
What is a car ban on one day for someone is an opening for another person who is allowed on that day to drive her vehicle for whatever purpose. A daughter intends to drive the car to visit her parents on a Monday, but the odd-even scheme prevents her from doing so. Hence, she decides to use the car on a Tuesday to visit her parents. But another daughter who cannot use her vehicle on a Tuesday to visit her parents because of the odd-even scheme reschedules her visit on a Monday.
I have elaborated on just one ineffective proposal to resolve the traffic mess, unfortunately an idea coming from the President. But other proposals should likewise be debated upon.
The gains from some of the proposals like repairing and expanding the roads and improving the metropolitan rail system will be for the medium term. But people, or the voters, are getting impatient.
To be sure, some measures can have immediate results in alleviating the traffic jams. Better traffic management and coordination, including traffic light synchronization, deployment of educated and trained enforcers, and restricting parking on public roads or imposing high parking fees are measures that the general public, including motorists, will welcome.
Other measures require political will. Hard but effective measures include the rationalization of the volume of public utility vehicles in Metro Manila and related to that, the strict implementation of the wage system and the unconditional removal of the boundary system that should apply for drivers of public utility vehicles.
But what surprises me is that only a handful, even among the public intellectuals, have advocated an increase in the excise tax on petroleum products. The increase in the excise tax on the petroleum tax, like the reform of the excise taxes on tobacco and alcohol products in 2012, has multiple dividends.
In the present context, an increase in the excise tax for petroleum will reduce consumption of the gasoline for motorized vehicles and thereby reduce the frequency and intensity of vehicle use.
The increase in the excise tax rate for petroleum will substantially boost revenue. The incremental revenue from the tax should be used to finance the modernization of the railway system, the improvement and expansion of road infrastructure, and the subsidy of public transportation, especially for the working class. The subsidy can offset the muted increase in transportation fare arising from the increase in the price of gasoline.
In addition, the tax on gasoline addresses a negative spill-over, which is air pollution, resulting in the deterioration of the quality of life and a sharp rise in diseases.
The petroleum tax can be part of the tax reform package that includes increasing the exemption level for the individual income tax. That should be a good deal. One common argument for both the petroleum tax and the individual income tax reform is the adjustment to inflation.
In the case of the petroleum tax rate, it has not been adjusted to inflation since 1997! It is but fair and reasonable to do the adjustment now.
For example, the tax rate for unleaded gasoline since 1997 is P4.35 per liter. Adjusting the tax rate to its present price means a tax rate of P9.15 or an increase of P4.80 per liter. The rich and the middle class, the main consumers of gasoline, can afford this. After all, oil prices at this time are low.
The question is: Will the politicians have the courage to stand up for this advocacy?
Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.