Why Subsidizing Public Transport Makes Sense

Public transport in Jordan faces a myriad of challenges, some of which are operational, while others are legal and legislative. A key challenge that’s often overlooked—or at least, until recently, not a part of the national discourse on transport—is the lack of public subsidies.

By Hazem Zureiqat

Public Transportation

For decades, public transport in the Kingdom has been managed and operated separately—outside of its wider urban, economic, and social contexts. To that end, the sector has long been viewed through a predominantly commercial lens: government establishes the rules of the game, defining routes and setting fares, and the private sector—represented by the large bus companies and the smaller Coaster bus/‘servees’ operators—operates the system. Operators, in many cases, pay the government a licensing fee or an ‘investment’ fee (the latter’s name goes to show the extent to which the sector operates on a commercial basis) and run their vehicles in such a way that maximizes revenues and, thus, profits.

This long-established modus operandi entails that the system operates with no government subsidies. Since the government sets fares in a way that, supposedly, covers costs and offers operators a 10 to 15 percent profit margin, and since operators run their vehicles with little oversight on service standards (in terms of running on a fixed schedule, for example), then the system should, in theory, be profitable on its own.

This does not work and government must subsidize public transport operations. Why? There are several arguments, the most relevant of which to the Jordanian context are:

Creating the right incentives: The current approach creates an environment where the only incentive for operators is—to no fault of their own—maximizing profits. If that means that the bus will have to wait at the Mahatta or Sweileh terminal until it is completely full, causing delays to passengers, then so be it. If it means squeezing in more people and making it uncomfortable, especially for women, then let it be. With adequate subsidies and the right contractual arrangement with operators (putting service quality first), government could bear the risk of running an empty bus. As long as the operator runs a bus every 5 minutes in peak hours and every 15 minutes otherwise, for example, they get paid; otherwise, they wouldn’t. The profit-maximizing incentive should be aligned with providing a high quality of service, and someone (government, at least for now) should pay the price for that.

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Being ‘fair’ and equitable: The ability to move around to access jobs, shopping, and leisure is a basic right, and one should not be forced into buying a car in order to practice that right. Fares should, therefore, not be set to achieve cost recovery (i.e. to recover the costs of operations and the profit margin). Rather, fare setting should be a policy decision based on social equity considerations. The deficit, if any, should be covered by subsidies.

Charging everyone who benefits: There are many wider economic benefits to improving public transport. The most visible benefit to many is reducing congestion levels. If car drivers benefit from public transport, why shouldn’t they pay for it?

Striking a balance with the private car: Think of two competing products, where one is heavily supported and maintained by government, and the other strives to gain its market share on its own. This distortion is present in our mobility system: using a private car is subsidized by government, through the building and maintenance of roads, bridges, and tunnels, the provision of free parking, etc. Unlike public transport, what we as citizens and residents pay out-of-pocket for using a car in Jordan is much less than the true cost of using a car. Addressing this distortion—not only through public transport subsidies, but also through stricter control on car use—is the only way we can create a balanced, efficient, sustainable, and truly multimodal mobility system.

Subsidizing public transport requires a true paradigm shift. With budgetary pressures, a weakening political will, and a fragmented public transport sector, this shift seems far-fetched for us. However, if we want to retain our right and our ability to move around, we have no other choice.

Hazem Zureiqat is a transport consultant at Engicon, a multidisciplinary engineering consulting firm based in Amman, and a founding member of Ma’an Nasel, a citizen-led public transport advocacy group. He can be reached at hz@hazem.me.