VietNamNet Bridge – HCM City needs to call for investment from diverse sectors instead of relying exclusively on subsidies to improve its bus service and attract more passengers, industry insiders say.

The advice comes after a project to upgrade bus services and boost public transportation in the city, begun in 2002, has failed to meet expectations despite extracting increasing subsidies.

The subsidy for the city's bus service has risen continuously from VND39 billion (US$1.95 million) in 2002 to VND700 billion ($35 million) this year, an 18-fold increase. The trend looks set to continue, and may not be tenable in the long run, the experts say.

Total subsidies for the service has so far reached VND3.7 trillion ($185 million).

Additionally, the city has spent thousands of billions of dong to subsidise transport businesses to buy new buses, including a project to buy 1,318 buses to serve residents and 400 others to serve students.

Subsidies also cover management and operational costs, not to mention infrastructure constructions like bus stops.

Nguyen Minh Hoang, head of the Economic and Budget Division of the HCM City People's Council, said developing the bus service as a means of public transportation was a good policy, but the city budget was limited and could not afford the rising subsidies.

Many experts have argued that in a market economy, a subsidy model cannot be effective in improving products and services, so the city should throw the public transportation sector open to other investment sources including the private sector.

The bus service in HCM City has been operated under the PPP (Public-Private Partnership) model since 1978, with the city providing partial subsidies for petrol, tyres and spare parts for buses.

Relying too much on the subsidies, many bus companies have shown a poor sense of responsibility towards their work.

For example, they do not maintain and protect their buses well. They even sell surplus subsidised petrol in the market for their own profit. When the buses are out of order, the companies just sell them in the market at cheap prices.

Do Tien Luc, chairman of the Sai Gon Transportation Mechanical Corporation (SAMCO), said the city needed to improve its oversight and better manage its subsidies to uproot and prevent widespread corruption.

Despite previous experiences with poor management of subsidised bus services, the model still continued with in 2002 when the city bus system was reorganised, said one official who did not want to be named.

In fact, the Department of Transport has borrowed funds at preferential rates to subsidise the purchase of 1,318 Transinco buses and 100 Mercedes vans worth around VND1 billion ($50,000) each.

And now, the city is facing difficulties in sourcing the capital needed to replace nearly 2,000 buses that are in very poor condition, despite the heavy subsidies.

The city has about 3,000 buses, each of which is subsidised in excess of VND230 million ($11,500) per year. Other public transportation services like taxis and buses that run on inter-provincial or transnational routes are not subsidised by the city government.

VietNamNet/Viet Nam News