With the rising cost of fuel, you can well imagine that the prices of transportation here in the Philippines have gone up. Whether it be taxis, jeepneys, buses, whatever the mode of transportation, the fares are increasing. These fare increases, though, have made me a little curious. Every time that a jeepney operator wants to raise his fare by half a peso, he must seek approval from the government first. The LTO has control over this, that’s the land transportation office. Any time that any of these transportation operators wants to increase their price, they must file a request to the LTO. If the fare increase is approved, it applies to all vehicles of that class. So, for example, if jeepney operators think that they should increase the price, the petition is generally filed by their jeepney drivers Association, and if approved, every jeepney driver in the country can raise his rates then.
I feel this whole system is very cumbersome, filled with red tape, and controlled by the bureaucracy. I’m a free-market guy, I always have been. I feel it’s always better for the free market to determine the price than the government. If the current jeepney fare is eight pesos, what if José wants to make his jeepney nicer than all the others and charge 10 pesos? Well, under the current system he can’t legally do that. For me, that means that all jeepney operators have really no incentive to improve their vehicles, make them nicer, more comfortable or what ever. The price is the price, no matter what. What if Carlos wants to make his jeepney have air conditioning? Why couldn’t he do that and charge, the price that the customers would be willing to pay? I mean, the free market sets the price. If customers feel that a jeepney with air con is worth 20 pesos per ride, they’ll pay it. If somebody sets up a nice jeepney like this and they get no customers, well, they’ll have to adjust the price until somebody starts riding.
In today’s world, with gas prices increasing almost daily, having to go to the government and get permission for a price increase is kind of crazy. The approvals on these requests can take months to get done, and by then the requested rate increase is too small anyway, because the price of gas has gone way up. So, the way it is now, when a fare increase is approved, they immediately apply for another fare increase. Personally, I feel this is kind of unfair to the drivers. Frankly, I don’t see how a jeepney or taxi driver can make any money these days. The price increases in fares have simply not kept pace with the increase in fuel prices. I hear that a lot of such drivers are now seeking other forms of employment, because they simply aren’t making any money.
To me, the solution to this is simple. The free market. It’s a good thing!
Of course, all those ideas must be done by an efficient & effective government in the Philippines. And pigs fly too.
Morning Bob,
As far as I'm aware all western countries have a similar system for their major modes of public transport? I Australia the same sort of system exists although maybe it is a bit quicker. I think they need to have a department which constantly has its finger on the pulse and can react proactively and up the prices more quickly and drop the prices if necessary when and if the fuel price drops. These regulations are in place to protect the travelling public. In the west, you will find the most unscrupulous of sorts in the taxi industry and they would be out of control without regulation. As a westerner, your Jeepney fare would be lot higher than for the locals for starters! Other than for this, I agree, Darwin's theory of the survival of the fittest through natural selection appeals to me greatly!
Bob,
I think you’ll find that without regulation of the free market then you end up with oligopolies and monopolies, which is what I was trying to point out in my earlier post.
Given the enormous amount of power that a few families already have over the Philippines economy, I’d be very concerned if the Phils adopted a totally free market.
hello bob
i cant figure out how the goverment can keep incresing everything exept our paychecks.where is the balance?i guess the old saying is true.the rich keep getting richer and the poor keep getting poorer.
this is truely sad my friend. 😥
salamat bob
Hi AussieLee – yes, I'm in agreement with you that many many countries have a similar system. I never said that they did and nor did I imply that. But, I'm not talking about, what other countries do, but talking about the transportation system in the Philippines and what I think needs to be changed. I'm a free-market guy, I strongly believe in the market, and I think that the market can do wonders to the transportation system here.
Hi Ron W – the problem is, Ron, by increasing the price more money is being put in some people's pockets. When they raised the jeepney fare by one peso, that puts an extra peso for every passenger in the jeepney drivers pocket. So, that's a good thing for the driver, but not so good for the passengers! It's hard to find the balance sometimes.
Bob,
The free market is not always the best way. I find it interesting that in most free market economies there are laws and Govt agencies in extistence to protect consumers from the "free market" operators.
Recently in Australia one of our wealthiest (and most respected) businessmen was charged with "price fixing" in the packaging industry. This meant that just about every consumer in the country was paying more for everyday goods because of the inflated price for packaging.
On the topic of jeepneys, I think that there has to be a level playing field i.e. standard fare. If the fare was set by the market then you would have rich families buying up all the jeepney licences and then raising the price.
Hi Laurence – your first sentence — the free market is not always the best way — is your opinion, my opinion is the opposite. I believe that the free market is always the best. It's just a difference of opinion is nothing wrong with that.
Hi AussieLee – one other thing I forgot to comment about regarding your comment. You're simply incorrect that as a Westerner your jeepney fares higher. Jeepney fares are set, and as long as you know what that there is supposed to be you will never be charged more. The jeepney driver could get into serious trouble for that, and I've never had a time when somebody tried to take me for more than they should. Just setting the record straight on that.
Bob,
You were born a couple of hundred years too late, mate! The wild-west is your place if you want a 100% market ecoonomy! I truly am for a market economy in almost every sector, however, when people are starving from a rice shortage I don't want to see you say the government should do something about it! As an aside, I used to work in the AMCOR corporate head office (AMCOR was the other half of the price-fixing cartel) just before I think this deal was struck. Between them, they control basically 100% of the carboard box industry. The government agency I think in this instance was useful and used it's teeth for a change. What do you think Bob, because in a complete 100% laissez-faire economy these players would have continued with this corrupt practice?
Hello Bob,
Aussielee is correct, each state in Australia which the rates a taxi service can charge, it also sets the safety standards for the taxis and also responsible any complaints from passengers, plus any safety issues the taxi drivers may have. The main difference in Australia is that majority of taxis are owned by companies. Naturally they do not like losing money so they are on the governments back pretty quickly.
I do feel for the in the jeepney operators, I would be more enclined to let them charge more so they can keep the families expenses under control. But also the jeepney maintenance up to a good standard.
I compared the tyres on a jeepney I had the pleasure being in and I came to the conclusion they were balder than my head and that is saying something.
As for a jeepney having airconditioning, Bob please, the jeepney has just enough power to power its self its passengers. You would have to close all of the windows, attach doors to try and keep the cool air in.
When the said airconditioned jeepney gets a slight incline everybody has to get out to help push it over the hill. A major consideration is the fuel bill will go up as airconditioners use more gas.
I like the way jeepnies are as I always treat it as adventure when I get in one. It is fun to check your kneecaps for grey hairs,lose a kilo or two in sweat, bounce of the roof every time the driver hits a pothole and finally when you have reached your destination hop out and have your hands drag along the ground for a few minutes while you regain your composure.
Steven
Hi AussieLee – in a free market system, I do believe that the government has a right and a responsibility to ensure that it's a level playing field. This would include making sure that competitors don't become co-operative with each other in the area setting prices and such.
Hi Steven – as a matter of fact, Steven, I have seen an air-conditioned jeepney, that was in Cagayan de Oro city. So don't say it can't be done, because I've seen it. Also, I'm not saying that jeepney should be air-conditioned, I only said what if they want to, are what if one driver wants to do that, he should be free to do so, if that's what he wants. It's his jeepney, he owns it, or somebody owns it and he rents it. It's his vehicle, and he should be able to do what he wants. And yes, adding air conditioning would increase the use of fuel, but it should be the driver's decision, or the jeepney owner's decision I should say. Just my opinion.
ooohhhh..its gettin hot in here…think I'll wait for the next jeepney… 🙂
Hi Brian – I don't think it will get to hot Brian, but this does demonstrate the possible need for air conditioning! 😆
Hi Bob – Unfortunately, rising fuel costs also result in transportation strikes. 🙁
Today's PDI (on-line) reports from Bicol area:
http://newsinfo.inquirer.net/inquirerheadlines/re…
Hi Paul – if drivers were allowed to adjust their prices based on the marketplace, there would be no use for such strikes. Right now, I don't blame the drivers for being upset, their fares are not much more than they were when gas was less than 20 pesos per liter, and it's about 60 per liter now. Frankly, I don't see how they make any money. Obviously, they don't make much because if they did they'd be able to afford things like tires that were bald. If the free market were at play, and drivers can raise their price (or lower their price), based on the costs that they face, they would have no reason to strike at all!
here's the thing though, jeepney passengers don't look at the jeepney quality just the signs. to them, its al about utility.
when i was a regular passenger, all i was looking for was that "sasa/panacan" sign. during rush hour my focus became even tighter because i'm jostling for position trying to find that jeepney with that 1 empty space (notice i didn't say seat).
so, the relief here is to get the right jeepney, regardless of paint job. every passenger has their set of coins/bills ready to pay the fare. if there is a conductor, it can be quick.
the surprise of random fares (then adjusted to distance travelled) can be bothersome.
i know they are a private entity, but it is really similar to the city buses her in the US with uniform fares. jeepneys are such a common means of transport & i wouldn't mess with that system too much.
I see your point about free maket & for their freedom on how they choose to improve their main source of income. I also am for innovation, design & out of the box thinking in how to improve things. but in this case, i'm not sure if it would work.
Hi macky – right now, people look for the signs, I believe that's correct. However, if my system were put into place, maybe they would look for certain brand, or certain line of jeepneys, and that's how they would know. Also, regarding things like city buses in the states, those are generally owned by the government, the government maintains them and keep them running, make sure there are no safety issues etc.. The local jeepneys or private, and if they don't make any money out, can they afford to keep the things running safely?
Hi folks,
I would argue that the free-market is already at play in the public transport system in the Phils., in that the MAXIMUM fare is set by the government, but owners are free to charge a lower fare should they wish to do so. As I understand it, with the buses I have used from Digos to Davao, the fares are higher on the aircon buses than they are on non-aircon buses. Also, I think the taxi fares as per the meter can vary according to ac or non-ac?
While I agree with Bob that a fair price is often arrived at in a free market system, determined by the intersection of curves on a supply and demand graph, I do feel that if Jeepney running was a sufficiently profitable business, then as is the case with rice, it would be controlled by a few wealthy individuals who, let's be honest, control the prices via their cartel's to line their own pockets. This is very evident at the present time. That the jeepneys are run by individuals at the moment demonstrates that it's a very basic living for the owner/operator, and there is no excess profit for any entrepreneur to be interested in. I would say that there should be more government control though, in that there should be rigorously enforced safety standards for all public transportation. Vehicles should have to pass monthly safety checks, the drivers pass advanced driving tests etc.
I once took a taxi from greenhills to the Airport in Manila, which was a desperately entertaining, if not very frightening experience. I don't think there was a ball joint or suspension bush on that vehicle that was in serviceable condition, or a spring with any springiness left in it. It had a footbrake that seemed to work slightly, but the handbrake had no functionality, nor had it had any for a very long time. The driver was skilled at moving away on a hill by releasing the clutch rapidly enough to stop the vehicle rolling back, a skill he had clearly acquired over thousands of clicks. I have personally sold cars for scrap in the UK which were in many thousands of percent better condition than that scrapheap. On eventual arrival at the airport, the driver had to run around the car and open the door for me, since the inside doorhandle no longer worked. As I paid the fare with a p100 tip which should easily have covered the cost of buying a better car, I watched him roar off into the distance, murdering at least three people with the pollution that spewed from the exhaust. I suspect that vehicle did more miles per gallon of petrol than it did per gallon of engine oil.
Oh dear me, how I miss the Philippines.
Jim
Bob,
I agree with you 100% on this, because, like you, I think the market will handle things…unless the government wants to take over the entire transportation sector, how can these jeepney drivers survive…well, they can't. They are being sqeezed out from the top (the government and it's price controls) and the bottom (the market price of fuel). The result will eventually be a transportation crisis…something has to give. The market will reach the correct price very quickly if the government get's out of it.
If the problem is the price of oil, and it is, then that is really what has to be addressed…and there is no easy solution, unless the Philippines can find a domestic source of fuel. If the Philippine economy cannot compete with wealthier countries for the increasingly scarce oil supply, then transportation costs will just have to go up…or everybody walks. Putting the entire burden of the oil price increases on the backs of the jeepney owner/operators is the surest way to guarantee that nobody gets a ride at any price.
Hi Bob – I thought I mentioned that I was aware that the difference was that the US buses are gov't managed – must have deleted that when I was editting.
I actually offer no solutions to this, & yes private entities held to fixed incomes can be troublesome. I really am not sure how to go forward on this.
All I have are my experiences as a regular jeepney passenger in high school (ateneo to downtown or Lanang) & later in college (Mintal to downtown/Lanang). And I see random fares on similar rides as something that might not work.
But I do think a very drastic & innovative outlook on things related to transportation would be beneficial.
Ideas like a distinct freeway system, railway etc. (maybe even a 4 day workweek) may free things up enough that more fare options for the riders & drivers may even improve things.
BTW, I would also like to say that other government anti-market regulations, like the labor laws currently on the books in the Philippines, seem very destructive to an economy trying to emerge in the world market. From what I've learned at this website (and from personal experience with a dear one who is now living there), is that the current anti-market labor laws hurt the very people they are trying to help. Small business in the Philippines operates on razor thin margins in general, labor usually being the most expensive component. The requirements that employers help an employee buy a house, for instance, is insane. If they can barely make enough money to pay their employees a poverty level minimum wage, how can they help them buy a house after a number of years of service….plus, most small businesses don't even try to pay minimum wage…the person I referred to earlier works an 18 hour day (to help her family) and earns 1/3 of the legal minimum wage…and her employer can barely keep the business going…but she is thankful to have this job, because without it, her family would be in a very bad position…and she's lucky. The reason she still has the job is that her employer had to lay off the other 2 workers who were helping here…and that's why she has to now make up the difference and work all of the shift herself…she sleeps on a mat on the floor at her workplace, btw, because she doesn't have enought time to go home to her family and return to work on time.
Hello Bob,
I did not say you could not aircondition a jeepney, I think it would lose some of it charactor that's all. My main concern would be to make the jeepney safe for its passengers and driver first. Safety before luxury, I know which I would go for. The comment about the airconditioned jeepney was not a seious comment.
The thing is it is free enterprise that has caused this problems the world is now going through, not governments. Ask the american indians what they think of free enterprise in the last century.
Steven
Hi all,
This is a topic that deserves plenty of debate, but I think we need to remember one important point — jeepneys are the main source of transportation for people going to work, not private vehicles.
The government will side with the people needing to get to work over the jeepney driver most of the time. The passengers are a louder and larger lobby group than transport operators. If people can't get to work because they can't afford the higher fare, then they have no job, no food for their family, no taxes taken off their pay-cheque . . . The result is a jeepney operator will feel the pinch faster and longer that others. Maybe it's not fair, but maybe that's a cost of doing business in that industry? I don't know the answer on that one.
I think what is needed is a better mechanism for enabling jeepney drivers to get fare increases when they face fuel spikes. Clearly they are not getting increases quick enough, and this can result in poor maintenance, less income for drivers, etc. But how to balance this with the needs of a general public that basically uses public transport as an essential service and cannot afford large price spikes themselves is also an issue.
Not an easy issue to grapple with in a developing country, and this is certainly a hot-button issue in other countries regionally as well — just look at Indonesia and the looming riots because the government wants to lift fuel subsidies!
kamusta bob
as i read more comments here makes me think when i was in panabo and i was alone one day and this trycycle give me a ride home from the market.when we arrived i asked the driver how much i owe him,he just looked at me and shruged his shoulders and said how much.i know at the time each passenger was 6 pesos so i see he was very old and also very nice so i give him 20 pesos.i really figured the temp was like 98 that day and i would have paid 40 peso.i think like you bob that free market would work fine and also keep the fares low and compedative.i know where i live we have like 4 lobster buying companys so that keeps our lobster prices higher for fishermen.
salamat bob
Bob, I would have to say I am against free market when it comes to transportation. I am sorry but, I don't see your argument working in a place like the Philippines. This is a country where practically everything is the same price and people are used to it. And as for Jeepney drivers I have absolutely no compassion for them at all. For the most part, they are rude drivers, their verhicles belch smoke and other negative things that create road chaos. Getting to the point, I would have to say they should all be REQUIRED to improve their vehicles BY LAW to make them safer, cleaner and more comfortable or get off the road. I don't see Jeepenys as part of the real culture of the Philippines anymore. Maybe back in the Sarao ORNAMENTED Jeepeney days when they were like art work on wheels. I believe this country needs a more orgainzed transport system and that should be the focus. Frankly I think these Jeepneys need to be retired and the sooner the better or better controls put in as soon as possible. thank you for the opportunity
Hi jim hannah – having the government set up the fare, maximum or minimum, is certainly not the free market. The free market is just that — free — the owner of the jeepney gets to set the fare, not the government. I surely understand that we can all have our own opinions, but mine is that the free market should control the price.
Hi RichardInSC – finally another free marketer! Thanks for your support.
Hi macky – one thing about the government management, the government doesn't care if they make or lose money as a matter of fact, the government almost always loses money. A poor jeepney driver can afford to lose money every day, if he does his family won't eat. Like you, I feel there is really no solution to the problem, at least none that are clearly visible.
Hi macky – I saw pig flying just this morning! 😆
Hi RichardInSC – that sounds like a very tough life, and unfortunately it's too typical here. Your friend is a good person to work so hard to help her family.
Hi Steven – I agree with you, adding air conditioning to a jeepney would no longer make jeepney in my opinion, however, it would be a different vehicle all to itself.
I'm sorry, but I totally have to disagree with your statement that the free enterprise, has caused the problems as world is facing. Quite the opposite in fact. Look at the Soviet Union in the 80s, people stood in line for food, and when they got to the front of the line there was very little food available. That never happened in the free world, and I feel that is strong evidence of the difference between a socialist system and free enterprise. As for American Indians, take a look at their vast holdings of casinos these days, look at how much money is rolling in for the tribes in this venue, after you see that as the Indians how much they like free enterprise. The answer might surprise you.
Hi Martin – making a free market of the transportation system is not anti-riders, as a matter of fact it could be very pro riders. The three it doesn't necessarily mean that prices will be higher, as a matter of fact, because of the free market prices would probably be less in many cases. Competition generally means that prices will stabilize at the lowest profitable price. You sell coffee. How would you like it if the government set prices for coffee? Personally, I feel that the free market is always best for business owners and customers alike.
Hi Ron W – tricycle prices are largely unregulated, and tricycle drivers often just let you pay what you think you should pay. They particularly do this with foreigners, because they feel like we will pay more than we should.
Hi Richard Wicky – most of the problems that you're talking about are not caused by the jeepney drivers, but rather the owners of the jeepneys. Also, the fact that the fares are so low, that's part of the reason why the drivers can't get the vehicles fixed so that they don't belch smoke or have other safety problems. Higher fares would address that. Also, I don't think that opening up the fair system to the free market would necessarily make fares higher, they may even be lower, because new efficiencies could be found cutting the cost of operating the jeepney. This is the kind of thing that the free market does when it is put in place.
This is a very funny post! Why dont we have free market fare system to public transportation system so that they can make a living in the rising oil prices? the oil prices are regulated, so are fare system!
Hi Laurence – I understand what you are saying. However, if you read my comments, I also said that SOME government intervention and regulation is necessary. The government needs to ensure that there is no collusion amongst the players, because if there is, that is not a free market system.
Hi khaye – What makes you think that oil prices are regulated in the Philippines? That simply is not the case. If the oil prices are regulated, why are the big oil companies able to raise their prices at will?
on oil prices: they were regulated a decade ago but during the ramos administration that was reversed.
the logic to that was deregulation would allow more competition &, as a result. lower prices. whoops. there were widespread debates & protests around the time of this decision.
@Bob & Laurence – both of you make good points about monopolies (already in existence) & gov't intervention in a freer market. Made me wish I did better in my economics class to offer a solution to all this.
The problem with trying to ensure no collusion between parties is that there is no clear line between businessmen & politicians.
They seem to play the same game & appear to always be in on a lucrative deal. From the taipans on official overseas government trips to the recent China/RP deal involving the election commish etc.
I'm not sure they can keep it within the rules. Heck, under the RP constitution, there should be a separation of church & state. Just looking around, you can see that that is not the case.
Hi Bob,
An interesting topic that has provoked much more response than I would have expected. Just thought I'd mention that your voice recognition system must be needing tuned…see back to your reply to me…No. 27. I think I got the general gist of it though. 🙂
Sorry about that, Jim. Apparently I was not paying attention when I posted that comment, and the software had a hard time understanding me that time! I have edited it, fixing the mistakes. I do apologize for that.
Hi macky – Economics was my major in College, although I didn't finish… got bored and dropped out before graduating. However, I am somewhat passionate on the topic of economics, and while I consider myself an entrepreneur, if I were to choose a "profession" I would have to become an economist. 😆
Bob – and that, sir, is why i sometimes defer to you on this type of topics. in fact, my economics prof wasn't really pleased with me.
my head hurts. i try, but my client market has an average age of 7 & I just doodle for a living. 🙂
btw, kidding aside. i enjoy these discussions. it's difficult to find these back & forths in the real world … in both sides of the pacific.
Hello Bob,
The Soviet Union was not a socialist country but a totalitarian country when it when collapsed and was riddled with corruption. The problem with free enterprise it only good for a minory to of people with skills and knowledge to use the system to their benefit. A lot people get left behind in a free enterprise system, remember there a hell of a lot poor people in the USA. Socialism is not a bad thing infact most countries have some sort of socialism built into the polical systems. Alot of these countries are very successfull.
The trouble with free enterprise is with no form of government minimum standards for pay and safety standards for ordinary people, there would be a lot more poverty. It was the power of the unions and governments that have forced businesses though out the western world for better pay and safety standards we enjoy today.
Steven
Hi Bob, I agree with your philosophy 100% Although I'm an engineering major, i have studied economics extensively. I'm a follower of Lugwig Von Misses. I know that Government, any government, can screw up a steel ball with a rubber mallet.
Hi macky – Your clients may be 7 years old, but I feel that the work that you and I do have a lot of similarities. 😆
Hi Steven – The USSR was indeed based on a Socialist philosophy, it was the "Union of Soviet Socialist Republics" after all. You are mixing your metaphors, Steven. You say that the USA has a lot of poor people because of the free market. Yet, you say that under the free market there will be no government standards for pay, safety and such… yet those things indeed are in place in the USA.
Anyway, I didn't intend this to be a discussion going deeply into socialism and such… I just think that the drivers of transportation here in the Philippines need a way to make a decent living, and provide a better service to the public.
Hi Hudson – I will go with an old saying, from Thomas Paine – "The government that governs least governs best."
Since we're on the transportation topic:
Just 2 days ago, the president unveiled a P500 million soft-loan package for public utility drivers.
This package can be extended to the drivers' relatives & will be sourced from the Value Added Tax (VAT).
This is being coined as an alternative way to "boost the drivers' income". I wouldn't call it income when it is, in essence, a loan.
Still, I do understand that the country needs to think within the scope of giving incentives to certain sectors.
This is a substantial package that is in timing with your article. It's not free market talk, but it revolves around jeepney drivers finding other ways to access money.
Hi macky – Yes, I saw that story. It's funny, because I wrote this article almost a week ago, and set it to publish today! Do you think that GMA is looking at the LiP publishing queue and scheduling her announcements based on what I plan to publish? 😉
I am with you – how can a loan (low interest or not) be considered an increase in income? I thought the same thing when I saw the story on the news a couple days ago!
Uhhh… pardon my ignorance Bob, but something you said earlier has me a little confused.
You said in #35 "…most of the problems that you’re talking about are not caused by the jeepney drivers, but rather the owners of the jeepneys. Also, the fact that the fares are so low, that’s part of the reason why the drivers can’t get the vehicles fixed so that they don’t belch smoke or have other safety problems…"
How can a problem caused by the owner be expected to be fixed by a driver, from their meagre earnings? In Australia, in the past I've driven cabs for a number of owners,and all maintenance and safety issues are the responsibility of the owner, not the driver. I'm aware that many things are done very differently in the RP, but surely owners there don't expect drivers to foot the bill for maintaining something which isn't even their property?
Hi Garryck – I'm sorry for my error. I meant that the owner of the jeepney should fix the deficiencies. But, the fact stands that the fares currently being charged are not enough (in my opinion) to enable such fixes to take place.
hi bob,
I just want to share my own experience, 4 of my brother-in-law owned a jeepney, you may not believe me telling you this, I know how people speculate on how much money a jeepney driver makes everyday, they make more than what a white collar employee makes everyday, driving from 3AM till 10AM, they make a net profit of 800~1,100 a day and that is driving for 7 hours only, of course it depends on their route, the problem with most of the jeepney driver is that most of them don't own the jeep, they have to pay the real owner for a "boundary fee" as far as i know the "boundary fee" nowadays run for 600Php a day or maybe more, depending on location and route of the jeep. the actual driver who don't own the jeep ended up with a liitle money for him.
Free market is good because it creates a competitions among businesses and in turn it creates a price war among them, however that is not always the case,we should also look at some angle that affects on how the prices is set.
I own a couple of Internet cafe in the philippines, all of my computers are custom built and top of the line, my internet shop is fully airconditioned, my cubicle is designed to give customer a privacy (closed spacious cubicles), the software i use are all licensed, i have the latest games on my computers and a very high speed dedicated leased line, i also have a bandwidth management for each computers, i also have a Hotspot service too. with all of the bell and whistle i have on my internet cafe, you would think that I could charge my customer a higher fee because i offer the best service, the truth is I can't, the customer don't see the best of my service, for them all that matters is the "Price" they will not pay 25 pesos an hour for a very comfortable internet cafe versus a15 pesos an hour for a hot-and-not-so-good-illegal-software-no-games internet cafe, i would agree with macky that the customer don't see the bell and whistle of the service but rather the usefullness of it. this thing happened with one of my internet cafe in batangas.
I have the same facility in Paco Manila, the problem i have is, there's a group of internet cafe there that set their own price, there are approximately 20 or more internet shop members and their price is way too cheap, i wonder how they survived with that. again, customers look for a cheaper price and not the bell and whistles. i could say that there is a cartel on that area.
I remember a few decades ago, the oil prices was controlled by our government, the people cried for an oil price de-regulation and so it happened, and when the de-regulation bill was passed, the oil company in the philippines starts to jack their prices up, and now, the same people who asks the government to de-regulate the oil prices is now crying to regulate it again.
oops… forgot to mention, here in Oz, fuel and other running costs are also worn by the owner. Perhaps a shift to a similar system would enable Jeepney drivers to earn a living wage…
Hi dans – From 2000 until 2002, when I lived in GenSan, I had two internet cafes there. Like you, my cafes were top of the line. Nothing but the best. No other internet cafe in town could compete with me on technology, ambiance or quality of the surfing experience (btw, I did not allow games in my cafes, only Internet or business computer use). I charged roughly 3 times the price of any other cafe in town, and I had a ton of customers, as many as I could handle. So, I know that it can happen, although I also believe you that in the area where you are it might not be possible. It can be done, though, if you choose the right technology, right location, etc.
Hi Garryck – I think that no matter how the costs are shared, neither the driver or the owner will want to lose money! 😆
hi bob,
year 1998~2005 was a really good business for internet cafe owner, not nowadays, the inflation affects the attitude of people towards choosing a service.
oil prices are regulated because any raises need to be within predetermined system, just like electricity.
the oil companies are raising prices like crazy now becaseu they say they didnt raise them earlier when they should have, so now its catching up to what it should be.
just WHY do you think, bob, that petron,shell and all others charge same price within given geographical area? there is same regulation in u.s. as well.
regulatin here means that there is a system already in place for calculating how much oil prices will rise at the gasoline stations. ok.
bob internet cafe is not commodity. jeepney franchises are commodity. so is public transport. bob u need to study business more.
Hi dans – I fully agree, the internet cafe business is really not a good business these days like it was in the 90's.
Hi khaye – I am sorry, but you are simply wrong. Oil companies do not need any permission or predetermined system, they raise prices at will. Oil was deregulated in the US almost 30 years ago. Your information is so out-dated, yet you say that I need to study business. Hmm…
Hi bob,
I used the regulated word incorrectly. I meant that gasoline prices at the stations have to be related to the oil prices ohterwise governemnt will intervene and ask for justification. This is what happens in philippines and also america. Why do american senators yell at oil companies for making too much profit? if everything is free market and they are able to charge any price they want? a toy company can charge 3,000,000 percent profit and the american senators don't care. but with gasoline they do because this is a commodity and commodity by nature is necessary thing, not like a toy. so oil companies have to answer to the govt and the people if their prices do not represent what is going on in the oil market. that is what i meant by regulation. i made mistake of using the term when it has specific legal meaning. but i said you should study business more not related to regulation of oil but because you try to make the situation in internet cafe same as jeepney fares. i said u need to study more business because internet cafe is like a toy not necessity and jeepney a pubic transport is a commodity and necessity which requires regulation. so you need to study more. ok? and i meant you need to study more in light sense. i wasnt picking fight.
Hi khaye – The fact that prices of commodities are set based on the cost of the inputs IS THE FREE MARKET! In the free market, the costs are considered and also the supply and demand, this is what arrives at the price.
I've said enough… let's just let it rest.
I want the jeepney that offers peanuts and pop on your airconditoned ride to your destination!!
Hi Brian – You mean the limousine? 😆
why dont you offer internet in jeepney, so that passengers can do some chatting while going shopping? better yet, offer oil massages and manicure. this whole talk about free market being applied to public transport is ridiculous. you dont even have that in america, so why u bring it up in philippines?
discussing things that are intereting to expats is ok and good and thats what this site is about i guess. but dont try to give stupid ideas for the "benefit" of poor filipinos. that is insulting. you know nothing aout the poor filipinos. i bet bob, you would die in one day without aircon. and i bet when you go driving to samal or wherever, your aircon is on full.
go and talk about things to make your lives easier for expats in philipines. thats great. but don't go brainstorming about what's good for poor wihtout understanding even a bit about it. its downright stupid and insulting. most of expats in philippines are below middleclass back in america, so stop acting like high and mighty here in philippines.
Bob,
The free market works on the "lifeboat principle". There's only room for first class passengers and the rest have to tread water to survive.
# 39 "why are the big oil companies able to raise their prices at will?"
Petroleum engineer of 35 years here – Bob, big oil companies have very little, if anything at all, to do with oil prices. The price of oil is determined almost entirely by what happens on the New York Mercantile exchange. This is your "free market" at work.
By the way, I've been reading your posts, and from your liveinthephilippines site for about a month now. GREAT SITE ! I've learned a lot about the Philippines from it, and I long to return to the Land of Smiles – I've not been there since 1972 when I was in the Navy. I feel a visit forthcoming at some point in the near future. 😛
Hi khaye – your attitude changes by the minute. Ten minutes you said that you "don't want to pick a fight" and now you are attacking me personally. Frankly, Khaye, I am pretty tired of you.
Hi Laurence – we are each entitled to our own opinion. Sometimes we agree, other times we don't. I'm afraid that this time we don't seem to agree. 😆
Hi Spencer – Thanks for your kind words.
When I said that "oil companies are able to raid their prices at will" I am talking in a consumer sense. Consumers buy gasoline and diesel and such items, and those are not set in the commodities markets, but rather by the big oil companies. Of course, the costs that the oil companies have to pass on originate in those mercantile markets.
Thanks for your comment.
ohhh, now she's "defending" the pinoys. a little too late for that.
can i get a shave on my ride too? wait, on second thought, scratch that. i've seen the bumpy roads there.
Hi macky – It's amazing, isn't it? For the life of me, I can't figure out Khaye. Of course, I'm just another stupid expat who knows nothing about anything! 😆
Hi Bob. I wonder if the kutseros with their tartanillas are under LTO regulations.
If not, they should be raking it in.
I heard a lot of farmers who were using tractor tillers are going back to the carabaos. 🙁
Hi Dr. Sponk Long – I don't know about the tartanillas, but I suspect that they are free market! It is true that the carabao is making a comeback as the farm implement of choice!
who? mindanao bob?! never. that guy's practically a durianburg celeb.
you know me & my penchant for long counter replies (i need help, i know). on this one, i didn't even bother.
hi bob,
As i said previously, Free market is good, it creates competitiveness, imy opinion we are missing some aspect why "free market" in the philippines is not the same as free market in other countries.
for one thing, we should look at "how much money" a common pinoy are willing to spend for a particular product?, if only the wages here is as good as in other countries, then a simple pinoy can choose which service or product to buy, and of course business owner can offer different services and prices, isn't it one of the reason why there's a lot of product in the philippine that comes in a sachet packet? products like shampoo, toyo?? because a commoner could not afford to buy the whole bottle.
if the wages here is as good as in the states, then a jeepney owner who wish to install an aircondition in his jeep and charge 3 times higher is possible and customer would buy it.
the way things now in the philippines is, free market is somewhat not the way we would like to think, there are many variables to consider. price regulation is needed especially if the average income of a common pinoy cannot even sustain a daily living, a lot of times, i've read a lot of article saying that an average filipino income is just about 300 dollars a month, which is true by the way, if this kind of income is prevalent among workers, then it is unjustifiable and unfair if oil company will put their price at 3~4 dollars a liter.
Free market is only good IF the consumer has the money and willing to spend it based on the quality of products. free market is useless if the consumer has nothing to spend with in the first place.
do you think an aircontioned jeep, or a high class internet cafe will be successfull in you were to apply it in a very poor country? poorer than the philippines such as africa? where food is given a high priority than anything else.?
just my opinion.
Getting hot in here… I need an AC. LOL.
Someone mentioned that there is no internet access on public transport in America. Be aware, it is now available. I've seen buses (okay, they're not jeepneys) advertising WIFI.
As far as jeepney riders in the Philippines, I think that since the jeepney is the mass transport system catering to the majority (mostly minimum wage earners), that riders won't care for bells and whistles, even if they're available, if it means paying more. They'll go for the minimum expense that gets them from point a-to-b. (What will accomplish the objective at minimum expense?)
Those that like comfort are not jeepney riders. Those are the moneyed elite, with air-conditioned vehicles and yes, a driver to go along with it.
And in between, you have the class that can afford a little bit of comfort so they probably ride an air-conditioned cab. I think, at least, when it comes to cabs, there are better choices. I've seen dilapidated cabs and "newer/shinier" better maintained cabs there.
Hi dans – actually, the free-market insures that that won’t happen. If every GP driver goes out and installs air conditioning (which won’t happen), and all jeepneys are too expensive, you can be sure that there will be a lot of other people who will notice in fact there is money to be made at the low-end and they will begin offering economy services. That’s how the free market works.
hi bob,
i have to disagree with you, isn’t it you said yourself that free market is about consumers choice? then what insurance that the free market can make that it will not happen? i will take the provincial bus as an example, decades ago, you won’t find buses with aircondition or an on-board tv. nowadays it is very common to find one, as a matter of fact there are numerous buses that has an inclined chair or you can turned it into a bed for your comfort, with all these convenience and comfort the bus offers, our government regulate the fares, what if the government will not regulate the fares of the buses, obviously, those who have bells and whistle can charge more than the regular bus, but becuase our government controls them, even if they have jacuzzi in the bus the fare would be the same.
you said yourself that you’ve seen a jeep with an airconditioning, what if the trend becomes every jeep has an airconditioned installed? it is not far from happening, the same thing already happened with the tamaraw FX that you find in manila
Hi dans – the free market can help the poor too. You mentioned about the sachets of shampoo and such, and you're right, they're available because poor people can't afford the big bottle. But why do you think that the companies bring those to the market? Because of the free market, the free market is what makes them do that. The companies can see that in order to get more business from the poor people, they can offer the very small packages, and they'll sell a ton of them. If not for free enterprise, every company, which is so one size of shampoo and people either buy it or they won't.
Hi ecstasy – you are exactly right, most people don't want any bells and whistles, and the free market will address that. The free market gravitates towards what people want. The lack of a free market forces people to choose things that they don't necessarily want. The free or to market it as the more choices will be available, and the choices made available will be based on what people want.
Hi MarkC – I'm with you, I don't think those jeepney drivers are taking home a thousand pesos for half a day's work. More like you say, they're lucky to bring home a hundred pesos I think.
hi bob,
you have a point there, however, companies who make small amount of product such as those in sachet packets is not based entirely on free market, but rather, it is dictated by the current economy and the capability of the people to spend money, IF only the wages in the philippines is the same as those in 1st world country and if every pinoy can earn 3k dollars a month, i doubt that there will be a prime commodity product on sachets packets.
all i am saying is, it is not the free market that makes companies to produce product in small amount, but the purchasing capability of the target market, if the company will not adjust to the current economy and to the purchasing capability of the people of that country, certainly, they will lose the business.
as a good example, the minimum wage in the u.s.(alaska) is about 7 dollars an hour, so an 8 hours work is 56 dollar a day or an equivalent of 2,464 pesos (a rate of 44:1) compared to the current minimum wages of 350 pesos a day (7.95 dollars), with the 2,464 pesos a day, i could choose any service or product that is of high quality and not minding the cost, then the free market could take place as i have money to spend with, however, the reality is far from that in the philippines.
the free market in the u.s that you probably expecting is not the same free market in the philippines, it's just that the people just don't have the capability to choose or to increase the price because of what the economy dictates.
Hi dans – if you're making a perfect case for the free market! The free market is all about consumers dictating what they will or won't buy, what they can buy and what they can't. Consumers make choices — maybe they can't afford that big 64 ounce bottle of shampoo, but they can afford to buy enough sachet packs to make it through a week. The consumers dictating to the manufacturer that this is what they want and need, and if the manufacturer listens, they produce the products that are in demand! In fact, exactly, is the free market in action. The free market brings choices, and those choices are born out of demand from the customer.
Hi dans – by the way, one other point I forgot to make — the free market doesn't just demand higher priced products, it works both ways. Whatever the consumer can afford is what the free market will produce — low-price or high price.
hi bob,
I like your thoughts on free market and the way you explain it, one thing that i really want to stress is that, manufacturer do not always listen to the consumers whether they will produce small amount of products or not, it is the economy that dictates them, in order for the company to survive they need to adjust themself, remember when the first time the 1mbps internet acccess was first introduced? it cost around 3k or more a month and companies who charge that much find themselves loosing the business, they didn't even bother to ask the customer if they like the price or not but they simply feel that they are loosing a lot, when the 999 pesos for a 2mbps was introduced, almost everybody jumped to it even if the service is very poor, the point i am making here is, filipinos will spend money if they have it regardless if the service is poor as long as it is within their budget.
the way i see it is this, free market in the philippines is not about consumers choice, there is no choice for both consumers and companies, in order for both side to survive, they need to adjust based on what the economy dictates and not entirely on free market.
hi bob,
just an additional, let's stay with the topic, if our governement will not regulate the fares, then every juan in the philippines will spend a couple of thousand pesos to install aircondition so that they can charge more, if that happens then every common pinoy specially those who earn less can no longer afford to ride a jeepney, and if you are riding a jeep yourself you may find yourself paying different fares on the same route.
Hi dans – anytime that there is a business opportunity, you can bet that somebody who wants to make money will take advantage of it. If all jeepneys have aircon, and the riders don't want aircon, there will be people who will start operating jeepneys with no aircon! If nobody else will do it, I will, so I know it will happen! 😆
isn't it the free market of pertoleum in the philippines is the main reason of this debate?
isn't it the free market is the main reason why the electricity is too high in the philippines?
isn't it the free market is also the reason why there's a lock-in period if you subscribed with the internet providers?
well.. that is the kind of free market we have to live in the philippines.
Hi dans – in many sectors, the free-market system in the Philippines is still somewhat immature. Things like lock-in periods for Internet providers would not happen if there were a lot more players in the market. Things like all well and electricity are written the delete free market systems because in many ways these commodities are monopolies, are close to being monopolies.
Hi Bob,
I have a friend that lives in Gensan and now they wait a long time for jeepney because a tricycle cost too much. So is it that the tricycles don’t have this rule? Just wondering.
Happy Saturday morning, from my nook of the world!!! I love this
debate.
Here's a joke I picked up to lighten the mood in this forum. This is from another site; unfortunately I lost track of it so could not give it the due credit. Anyways, let me just recap, verbatim… Here goes…
————————————————————————-
Late President Harry Truman shared your frustration.
“Give me a one-handed economist!” he is credited with saying. “All my
economists say, 'On the one hand … Then on the other hand… '”
Which brings to mind an economist joke.
So these two economists were walking in town when they noticed two women yelling across the street at each other from their apartment windows.
“They’ll never come to an agreement,” said one.
“Why not?” said the other.
“Because they’re arguing from different premises,” said the first.
(Badda-boom.)
And did you know that you could lay all the world’s economists end to
end and they’d still never reach a conclusion?
————————————————————————-
I wonder if this debate will defy the above joke?!
Hi Bob,
I agree that the free market usually works best. You would hate some of the things currenly going on in the U.S. An example is very high tariffs on imported ethanol so the farmers here can get a high price for their corn.
I am wondering about your thoughts on NAFTA. Many people in the states think it has cost a lost of jobs.
I do think the govenmnent has a role in helping people who cannot make it in the free market. I wouldn't want people living on the street like they did back in the 1930s.
Hi ben ream – I believe that tricycles are not really regulated much in terms of fares, but I am not 100% certain on that.
Hi ecstasy – Unfortunately, I believe that the joke is very true! 😆
Hi Joe Parisi – Yes, I believe you about the corn tariffs and such! I think I'm not going to get into NAFTA since it doesn't have any relation to the Philippines, and I believe it would lead to very heated discussion.
Bob's post got me interested in reading up on the economic system in the Philippines. Here's some tidbits that caught my attention.
http://www.globescan.com/news_archives/pipa_marke…
20-Nation Poll Finds Strong Global Consensus:
Support for Free Market System
But Also More Regulation of Large Companies
……
"Ironically, the country that showed the highest level of support for the free enterprise system was China, with 74 percent agreeing that it is the best system. Others that were nearly as enthusiastic were the Philippines (73%), the US (71%), and India (70%). "
…..
"Broadly, most agreed that “The free enterprise system and free market economy work best in society's interests when accompanied by strong government regulations.” This view was endorsed by two out of three overall (65%). In 18 countries this was endorsed by a clear majority, with Indonesia (86%), the Philippines (77%), and China (76%) being the most definitive. "
Hi Bob. I think a tartanilla can be airconditioned. A dynamo (charging a battery that powers the AC) can be attached to the wheel axle and gear-engaged only when the horse is running. The kutsero's canopy and the roof may be solar-panelled too.
Also the methane the horse produces can be collected to light the lampara (lamp) at night.
I think it can work and can be profitable. I think there is a free market for it especially if they(tartanillas) are not under LTO regulations. What do you think?
(Just to put a smile on the face).
Hi ecstasy – Ah, now this is what I like! I like seeing my column sparking off some interest and people actually researching into it! You know what? They say that China was the number one country that supported the free enterprise system, and these days, when it comes to economic success, China is at the top of the pack! I believe that the two go hand in hand. I am happy to see the Philippines so enthusiastic about the free market system too! Thank you for sharing the information, Ecstasy!
Hi Dr. Sponk Long – Haha… I just woke up, it's 6am here. Your comment put a smile on my face – what a great way to start off a day!
Wow, did this one elicit some comments! And rightly so. I'll keep mine brief. (Yeah, right, when did that ever happen). I am strongly in favor of Bob's contention that the free market should rule! Period. (read my colomun for more 😉
Hi Dave Starr – Indeed, lots of discussion on this one! Glad to hear your comment too, especially since you are supporting me! 😆
hi bob,
free market in the philippines only benefits the companies and not the consumers, in the case of internet providers, the number of isp in the philippines is more than enough to choose from, however, these isp's are somewhat coniving each other to set prices and lock-in periods, back in the 90's when the internet was first offered to the public, there was no lock in period, it is a pay as you go service, and when one isp starts to make the consumer signed a "lock-in period" contract, the rest of the isp followed, now it is very common for any isp to have a "lock-in" period.
this is almost the same case with oil companies, one company raise the petroleum price, the rest of them just follow.
companies in the philippines suck the poor people dry.
the question of, if there is a free market in the philippines? the answer is absolutely YES, does it benefit the consumers? the answer is NO.
Hi dans – Thanks for your opinion, dans. Economists have, for centuries, described what the free market is. I guess that there is none in the Philippines, as what you describe is not the free market at all.
Thanks for sharing your opinion.
Hi Bob- while I dont totally agree with this one with you, my wife has seen an opportunityt to invest in the local sikad-sikad industry in her native province , as the cost of labor has not risen as much as fuel prices.
In her opinion she is happy that more poor people are offered an opportunity to earn some money renting the sikad.
I think that sometimes those of us with more than enough money/income forget how tough it can be to put your kids to bed with a hungry tummy.
Hey I know its late on a Sunday night but I gotta stay awake to see if Greg Norman can win the British Open! Go the SHARK!
Hi anthony – I must say, I am also rooting for Norman! I hope he wins it!
Good luck to your wife with the trisikad business! I hope she does well.
On a side note, the Philippines Central Bank raised their prime rate in order to fight inflation. The peso gained vs. the dollar immediately.
I'm a free market guy, grew up on poor in the USA, and that was the only system that got me to where I am today.
Socialism enthrones a small elite who control everything, the free market busts open a middle and entrepreneur class. As was rightly noted, one needs a government for two things: prevention of monopolies/oligopolies and prevention of social chaos.
Hi Thomas Shawn – Yes, it was almost instant that the Peso gained P1 against the $, but it is expected that in the long term the move will backfire, and cause the Peso to lose more ground. We'll see!
I agree with you completely about the free market!