2000 Transport Services For The Urban Poor

TRANSPORT SERVICES FOR THE URBAN POOR
Roger Allport
Halcrow Fox
Roger_Allport@compuserve.com
Infrastructure for Development: Private Solutions and the Poor

31 May - 2 June 2000 London, UK
TABLE OF CONTENTS
1. Introduction ........................................................................................................................... 1
2. Demand and the Ability to Pay ............................................................................................ 2
Relationship between city size and demand for public transport........................................ 3
Purpose of trips.................................................................................................................... 3
Willingness and Ability to Pay.................................................................................................... 4
3. The Supply of Transport Services to the Poor ................................................................... 5
Key Players ................................................................................................................................. 5
The Potential for Competition in Public Transport................................................................... 10
Ease and Cost of Interchange .................................................................................................... 12
Externalities............................................................................................................................... 12
Institutional Capacity to Improve Outcomes for the Urban Poor ............................................. 13
4. The Design and Impact of Major Private Sector Projects .............................................. 14
Concessioning Existing Rail Services....................................................................................... 14
New-Build Concession (BOT) Projects .................................................................................... 14
Impact on the Poor .................................................................................................................... 15
5. Rethinking Reform: Steps Towards Improving Outcomes for the Poor ....................... 19
Making Transport Service Markets Work Better...................................................................... 20
Improving Targeting ................................................................................................................. 21
Expanding Private Participation in Conventional Public Transport ......................................... 22
Designing Better New-Build Megaprojects .............................................................................. 23
6. Concluding Remarks........................................................................................................... 25
TABLES
Table 1: Characteristics of the Travel Options .......................................................................................8
Table 2: Probable Impact of Metro Concessions on the Poor..............................................................17
Table 3: Probable Impact of Expressway Concessions on the Poor ....................................................19
Table 4: A PRO-POOR PPI STRATEGY ............................................................................................26

1. INTRODUCTION
Access to transport is critical for the urban poor, for without it they are literally at risk of physical,
economic and social isolation. There is a widespread perception that urban transport policy is
dominated by the influence and demands of the affluent, whose needs are quite different from those of
the urban poor. During the last decade, governments have increasingly turned to the private sector to
participate in the delivery of urban transport services, with the widespread transfer of bus services to
the private sector, the concessioning of suburban rail services and a growing involvement in
expressway and metro concessions. Very often, these reforms have not focused specifically on
improving services to the poor indeed, they may perpetuate the anti-poor nature of much urban
transport policy.
This paper, which focuses in particular on bus and rail services, addresses what we know of the travel
needs of the urban poor, what markets for meeting these needs currently look like, the focus and
impact of major reforms aimed at increasing private sector involvement in urban transport, and how
reforms might be designed to target the needs of the poor more effectively.
The urban poor come in all shapes and sizes. The pavement dwellers in Bombay, pensioners in Omsk
and Kharkov, ordinary working folk in Pyongyang, the displaced in Chechnya and Kurdish refugees
in Tabriz, and the favela occupants on the periphery of many Brazilian cities have very different
characteristics. In addition, a distinction can be drawn between: poor cities (with a high proportion
of low-income population such as Lahore, Dhaka, Kabul), cities where there are sizeable pockets of
poor people (Jakarta, Bangkok, Sao Paulo), and cities where the poor are a minority who have fallen
through the safety net (Europe, Hong Kong). The cities of the Former Soviet Union and some in
Central/Eastern Europe may be in a separate category, as the urban infrastructure tends to be good but
the safety net (including free use of public transport) is collapsing. In poor cities, constraints on
affordability may dictate the cost/quality level of the whole public transport system; while in others a
central issue is how best to target the poor.
The location of low-income households in the city is particularly important for transport policy. They
are always at the margins of society, where land is cheap, or they squat where they can. The generality
is that the poor live at the city periphery, in the city on government lands, in the water-courses of
rivers and flood plains, or on inaccessible hillsides often in areas most prone to natural disasters.
They rarely have tenure, instead renting from private landlords or squatting illegally. Access to low
income communities is often impossible for formal public transport, as roads are sparse and unmade,
and lanes often provide the sole access. Sometimes lanes also serve as drainage channels, and access
even for pedestrians can be difficult. Peripherality is a particular problem, particularly for the poorest,
who are often recent migrants to the city. Their access problems have been reported by Bannister
(1993) for Rio de Janeiro. There, walking times were found to be much longer, more rides were
necessary to complete the trip, travel conditions were worse, trips were longer and more costly to
complete and this made it difficult for those with low incomes to compete in the labour market.
Transport in developing cities is dominantly along roads, but they are usually ill-formed and sparse.
Rarely is there a hierarchy of roads (primary, secondary, and for local access); often there are missing
2 Transport Services for the Urban Poor
links, and there may be no effective secondary network at all. The road is, moreover, not used by
transport alone: it is also a living and working space. If it has sidewalks, they are often encroached
with frontage stores, crammed with stalls and utility poles. Pedestrians are forced into the road under
threat from traffic, and the potential road capacity is seriously reduced. The road is used by all forms
of transport, pedestrians and bicycles/rickshaws, cars and buses and trucks. The result frequently is
serious traffic congestion, with no apparent solution.
The task of improving urban transport, a local function, is increasingly delegated to local
governments. As part of decentralisation policy, the need for institutional capacity building, and the
generation of a sustainable revenue base for local government are widely recognised. However, in
many developing cities administrative capacity is weak. And in many, institutional responsibilities are
unclear as between national, provincial, metropolitan and local governments, and between different
agencies. The design of transport strategy needs to be based upon a realistic assessment of
institutional capacity.
This paper addresses a number of issues critical to understanding the transport markets in which low-
income urban and peri-urban households operate, and the impact of conventional private sector
projects on these households. Section 2 describes the current state of knowledge on demand by low-
income households for transport services. Section 3 looks at the ways in which theses services are
provided in developing country cities, and the factors that drive their cost, quality and availability.
Section 4 discusses the typical nature of major private sector projects in urban transport, and their
implications for the poor. Finally, Section 5 looks at the potential for making private sector reforms
in the transport sector more successfully, and sustainably, pro-poor.
2. DEMAND AND THE ABILITY TO PAY
Travel is essential to allow the poor to access employment, healthcare, education and for
family/community support. Improved transport allows a larger range of jobs to be accessed, and
makes second jobs possible many poor workers take several part-time jobs at different locations to
maintain the basic level of household income. Ready access to basic healthcare facilitates effective
work and education as well as being necessary for the enjoyment of life. Further ease and speed of
access to education facilities can dramatically increase their usefulness. In addition, many of the urban
poor, particularly those on the city periphery, are migrants, and their links to their rural villages are
important as a support mechanism in times of hardship.
In seeking to understand demand for urban bus and rail transport, it is important to recognise that
households decisions to use these services are motivated not only by their cost and convenience, but
by the existence of substitutes (including the option of not travelling). Car travel is the domain of the
privileged few.
Empirical data on the travel needs of the poor are in short supply; such as are available are
summarised here.
Infrastructure for Development: Private Solutions and the Poor 3
Relationship between city size and demand for public transport

Developing cities are a buoyant source of public transport demand. The evidence (summarized in
Fouracre et al, 1999/2000) is that public transport demand increases by 350-400 trips/day for each
1000 extra population, and by 500 trips/ day for each extra urbanised square-kilometre of land.
Purpose of trips
The great majority of travel by the urban poor is for work and education. In Delhi almost all trips by
the poor were for these purposes, more generally in India about 90% were for these purposes, while in
Morocco it was 80% and Brazil 67%.
Frequency of trips
Poor people typically each make 1.5 to 2.5 trips per day by all modes (there are typically 5-6 people
per household). Evidence from Sao Paulo suggested that the poor make half the number of trips of
others. But in Pune a smaller city of 2.5million people, this was not so: the trip rate was similar for
the rich and poor; however women were found to make only 60% of the trips made by men. Overall,
it is probable that the poor make fewer motorised and shorter trips than average, and that, as wealth
increases, so does travel.
Length of trips
In Pune average trips were 5 kms for low-income travellers and 7 kms for higher income travellers.
For work trips the average trip was 9 kms in Accra, and 5 kms in Pune, with education trips shorter
but still surprisingly long: 7 kms in each city. The range of trips made by the poor is limited by time
and effort as well as money. It seems that their trips are generally not long in distance, but often
require interchanges, and are accordingly both long in time and costly.
Gender-differentiated demand
Not only do men make more trips than women (50% more in Pune), but their trips are also longer (by
20 to 40%). Most trips by woman are not as workers, but for shopping and accompanying children to
and from school tasks without which the household could not survive, but that have a lower claim
on the family transport assets. Women are less likely to have access to the family bicycle, and much
more likely to walk or use the bus.
Women often dislike buses and prefer trains. Almost certainly this is because of the overcrowding on
buses, when presumably they may be harassed or feel threatened, a situation compounded by carrying
loads or children, and the lower levels of overcrowding on the trains which may have women-only
coaches. In India this is common in Bombay there are 2 women-only trains in the morning peak,
and women-only carriages on other trains and it is also experienced in Mexico City (on the packed
metro, where the last 2 carriages are reserved for women) and Pune. In Pune women were asked
whether they wanted women-only buses, but they did not; rather they wanted normal, uncrowded
buses.
Travel mode
The transport market is characterized by a wide variety of potential travel modes. While for wealthier
households the trip length/orientation determines the mode of travel, for the poor it will often be the
other way around: the mode is often determined by trip length, for which there may only be one or
two possible modes. Choice of mode is often not fixed, for example it is common for low-income
commuters to switch their normal mode of travel from bus to walking towards the end of their pay
period, as their income runs out. The transition from walking to non-motorised transport to public
motorised transport also does not take place along a continuum; a change from one mode to another
for any individual often represents a quantitative jump in terms of travel expenditure. This jump may
be a major barrier for the poor to overcome.
Walking represents two-thirds of travel in Kinshasa and Dar es Salam, and 50% or more in most
African cities. In Indian medium-size cities, it represents 55% of travel by low-income households,
with cycling a further 20%. Walking and cycling together represent 60% of Karachis travel, and 40%
of commuter trips. In these cities the poor are dependent on non-motorised travel for the majority of
their travel needs.
The proportion of people using bicycles varies hugely for example in Asia from 13% to 91%;
indeed bicycles represent 50-90% of vehicular traffic in most Chinese cities. The use of bicycles is
influenced by their cost relative to incomes, cultural and societal attitudes, geography/ road traffic
conditions and utility in being able to carry heavy loads. In India and Malaysia it has been found that
bicycle ownership takes off when the annual household income reaches 10 times the bicycle
purchase cost; while in South Africa the evidence suggests this is higher maybe 20 times. In practice
many bicycles are purchased second-hand (two-thirds in Kenya). Moreover, access to credit to assist
the purchase can be important in Malawi this was the case. The importance of affordability was put
rather differently in Kranton (1991): When a bicycle that will last years costs the equivalent of 6-8
months of bus fares, there is a good profit for a poor person in having one and using it. This will be
the more so when as in Accra the bicycle is a shared resource, used on average by an additional
1.5 people per bicycle. At the other extreme, Bangkok is a non-cycle culture mainly because road use
policy maximises car use, making cycling extremely dangerous and unpleasant due to pollution.
In non-cycle cultures, buses and paratransit provide the travel work-horse. Thus, in Santiago de Chile
buses carry half of all trips, with 20% walking (1991) and the metro a further 13%. In Metro Manila
buses and jeepneys carry 54% of all trips and the LRT a further 2% (1996); in Lahore (1990)
minibuses/wagons carried 44% of public transport trips, buses 47% and other modes 9%. The figures
for other Asian cities are typically 50-66% of all trips by public transport.
Taxis also vary in their use substantially. In Accra they take 20-25% of all trips up to 25 kms in
length, their use being heavily influenced by income, status and gender. Motor-cycle taxis are often
used to penetrate narrow lanes, with 100,000 in Bangkok alone and many in Indonesia.
Willingness and Ability to Pay
Evidence on the willingness-to-pay of the urban poor is sketchy and anecdotal. To give some
examples:
In Jamaica, low income groups were prepared to pay a premium fare to ride a regular minibus
when faced with an irregular, overcrowded bus.
In Cairo (White, 2000) the travel choice of the urban poor when faced with the option of a metro
was surveyed. It was concluded that a premium fare over the bus may be acceptable if the journey
time saving was sufficiently large: in Cairo this was the case, and the metro was used by the poor,
but fares were still low and students and government/ army staff received discounts. But there was
no evidence that poorer people walked to the metro stations as opposed to using paratransit:
distance to the station appeared to explain mode choice.
In Uzbekistan social surveys concluded that, not surprisingly, minibus travellers had higher values
of time than travellers on cheaper, larger buses.
Evidence on travel elasticities, particularly for the urban poor, is also limited. For fare elasticities,
evidence from Cairo produces an elasticity of 0.2 for the public transport market as a whole (this
included travel cards, the single ticket elasticity was 0.4). A study of the Santiago metro which
served two low-income areas also produced an elasticity of 0.2. In Madagascar, a fare hike of 100%
resulted in a loss of just 3% in passengers.
Kranton (1996) concluded that demand by the urban poor for commercial transport services is highly
inelastic, even in the long run. For poor travellers faced with a fare hike, the short-term response when
faced with a long distance between home and work or education leaves little choice, in the short term,
but to pay more. Faced with this evidence, the rational response of operators in most situations (and in
the absence of competition) is to attempt to secure increases in fares, thereby increasing revenues and
if anything reducing costs.
It seems likely that elasticities rise with disposable incomes, with different relationships for work and
non-work journey purposes. It also seems that the inability of the poor to meet moderate financial
costs often exposes them to high non-financial costs.
There is conflicting evidence as to whether or not the poor spend a higher proportion of their income
on transport than other groups (Kranton, 1991). In Delhi, poor families spent 20-25% of income on
transport, whereas high-income families spent an estimated 9%. In Brazil urban households are
devoting an increasing proportion of the income to transport up to 20% in the metropolitan regions.
It seems clear that the urban poor must proportionately spend much more of their income on travel to
achieve basic mobility.
3. THE SUPPLY OF TRANSPORT SERVICES TO THE POOR
As discussed above, low-income households typically rely on a range of transport modes to meet their
travel needs including, often, a high degree of self-provision (travelling by foot, or by bicycle). This
paper concentrates on a subset of these modes more or less commercially provided group or public
transport, including both formal bus and rail services, and what are often described as paratransit
services. Whereas the former have traditionally often been provided by the public sector, on a less
than commercial basis, the latter are generally provided by an active private sector, often outside the
formal economy, on a fully commercial basis. In many developing cities, these latter services play a
major role in meeting the travel needs of the poor.
This section looks at the nature of the markets in which these services are provided in developing
country cities: who the different providers are, and what determines their cost structures; the nature of
competition within and between the sub-modes; sectoral tariff issues; and the nature and implications
of quality and externality issues in each of the sub-modes.
Key Players
The travel options prima facie available in developing cities today are defined by a combination of
technology, form of operation and management measures which can give some transport modes
priority over other traffic. These options include:
Walking on sidewalks or in the street. Walking is rarely used for regular journeys longer than
about 5 kms.
Non-motorised transport (NMT). This includes bicycles or hand-carts operating in the street. As
well as personal cycling and rickshaw taxi-like services, NMT has been adapted for such diverse
purposes as garbage disposal, ambulance services, carrying agricultural produce and wholesale
delivery. The evidence is that bicycles are generally not used for journeys longer than about 10
kms.
Attitudes to walking and cycling influence behaviour. In the Philippines both are counter-culture,
and even poor people pay to ride jeepneys. In Pune, India where cycling is widespread, it is only
now becoming socially acceptable for women to use two-wheelers. However in many African
cities there are negative cultural attitudes towards cycling, although this may vary even within
cities depending on the origin of the residents. These two options are not the focus of this paper
but do serve as partial substitutes for the options discussed below, at least for some travel needs.
Paratransit. This is a term used to refer to small vehicles, often owner-operated. Paratransit
includes small buses carrying 3-20 passengers, as well as motor-cycle taxis. Paratransit services
typically develop in the absence of formal bus operations, or in response to bus service
interruptions often beginning with converted pick-ups and trucks. Where it has become
established it has often spread, and in some cases has become the mainstay of the public transport
system. Fares for paratransit are often graduated, increasing with trip length.
The owners of paratransit are sometimes individuals those from poor families who have worked
overseas and invest to provide some security for their family, or people who invest windfalls or
pensions, and often the military, senior government officials and middle-ranking civil servants.
The drivers are sometimes the owners, but often other family members, or others who pay a fixed
boundary fee to the owner each day. Almost always governments try and control or ban
paratransit, which is seen to be outside their system of control: the huge number of such small
vehicles makes their regulation problematic to say the least. But, partly because of their
ownership and partly because they are so popular with the riding public, such controls fail; only
exceptionally has paratransit actually been reduced or removed. It thus seems that paratransit
often has a ratchet effect: it appears when there is a supply interruption, establishes itself,
expands, and expands again, fuelled by expanding demand in most developing cities.
Minibuses and Buses. These typically carry 20-35, and 35-70 passengers respectively. They may
be air-conditioned, and may travel non-stop between major destinations. Buses are common in
many developing country cities, although in many small cities in Asia (particularly Indonesia and
Thailand, but also China and Vietnam) there no scheduled bus services. In China buses are
usually regarded as the mode of last resort, used only by those unable to cycle the old/infirm,
young and the floating population who do not have access to a bicycle permit. Fares for basic
services (unlike paratransit) are often flat (the same for all trip lengths) for social policy
reasons, or because graduated fares cannot be enforced by the operators.
In a decreasing number of developing cities, bus services are now provided by a public monopoly.
Historically, many state/provincial/municipal bus operations failed as a result of unrealistic fares,
a lack of investment, political interventions, poor management and corruption. Lagos State
Transport Corporation (Nigeria 1992), Punjab Road Transport Corporation (Lahore, Pakistan
1997), and the Central Transport Board, (Sri Lanka 1993) are notable cases. In the former Soviet
Union, too, there is widespread failure of state/municipal bus operators, largely due to lack of
investment, and revenue and fare constraints. These failures have often created a spiral of decline,
with loss of investment, ageing bus fleets, and deteriorating service. Sometimes this has been
compounded by disruptions in service for reasons of war, civil unrest or protest..
Suburban rail. Suburban rail systems operate along rail corridors, at ground level, with
complete priority over crossing traffic. Existing rail lines often appear to provide an ideal
opportunity to develop suburban rail services, although in fact they often serve the old rather
than newer city Central Business District (CBD). In some cases they operate and are highly
effective Bombay is an example. More often they are under-developed. Recently,
concessioning of suburban rail services combined with the creation of autonomous
institutions with powers over revenue show promise in Brazil and Argentina.
Busways. These are part of the roadway, segregated between junctions for the exclusive use
of buses, which have priority over other traffic.
Light rail and tramways (LRT). We have defined these to be at-grade systems, usually built
in the centre of a road.
Metros. These are defined to be fully segregated rail systems, that are usually built elevated
or underground.
These last three options are found relatively rarely. Busways have proved highly effective in Brazil,
where they have been developed as systems to improve bus productivity at low cost. They are
expanding into other parts of Latin America, but there has been little interest in other developing
cities. At-grade LRT systems, which perform a mass carrier role down main transport corridors, exist
only in a few cities such as Tunis, Mexico City and Hong Kong (Tuen Mun). While many, or most,
city governments aspire to metro systems, the financial practicalities of building and sustainably
operating these systems make them rare in practice.
The public transport system in most developing country cities therefore comprises two main elements:
big buses, which are typically regulated, and paratransit that is in many respects unregulated.
Table 1 summarises the key characteristics of the modes today their operational performance and
the service level they provide, cost structure and externalities.
Table 1: Characteristics of the Travel Options
Mode Walk Bicycle Paratransit Minibus/ Busway LRT Metro Suburban

Bus Rail
Operational
Slow (in Varies,
Level of Service Poor, in Poor street envt) Slow (in street Quite good Good High infrequent
street envt. but frequent envt) stations
As bus but
Amenity Na Poor Seated Low unless easier to Often AC, Often AC, but Often
AC /seated board but standing standing standing
Operating speed kph Depends on Depends on With pre-
congestion opl design emption:
Service 5 12 typically 12 As paratransit 17-20 20 30-40 40
Door-to-door 5 12 <12 <<12 12 12 18 20
Fare 0 0 Yes Yes Yes Yes Premium fare Yes

System Capacity - -
Pass/hr/direction 12-15,000 20,000 20,000 20,000 60,000+ 30,000
Safety from
Other Issues Safety from traffic, Threat under Threat under Threat under Threat under Threat
traffic security for crush-loading crush-loading crush-loading crush-loading/ under
bicycle underground crush-
loading
Cost
Elevated $25-
Initial cost Na ? Often Often second- $1-5mn/km $10- 80mn/km ?
second-hand hand for 30mn/km Underground
Mode Walk Bicycle Paratransit Minibus/ Busway LRT Metro Suburban

Bus Rail
infrastructure $50-
180mn/km
Operating Cost Na Minimal
Economies of scale? Na Na No No Minor Yes Yes Yes
Externalities
Impact upon the poor Accessible Accessible Accessible Less Accessible Accessible High fares, Accessible
for many accessible in for bus users for some, more if fares
low income more interchange. low
settlements interchange Accessible?
Impact upon travel- Problematic Problematic Accessible Crowded, As for bus Problematic, Problematic to Accessible
disadvantaged for some, accessible for crowded, access, then for some
seat some more crowded
interchange
Road traffic Often need to Cycle in the Less Efficient road Very As busway Reduces Reduces
congestion walk in the road efficient user efficient use congestion congestion
road than bus of roadspace
Air Pollution
Created for others Na Na Yes Yes No No No
Problem for travellers As bus
Yes Yes Yes Yes, AC no No No No
Visual intrusion, Na Na Na Na Depends on Depends on Elevated Severance
severance design design yes, and yes
depends on
design
Traffic Accidents Yes, Yes Normal Normal traffic Minor Minor No Minor
particularly traffic accidents (level-
head-carriers accidents crossings)
In many developing country cities, major problems in meeting travel needs arise from the non-radial
journey-to-work patterns of many of the poor, and the radial nature of most formal bus routings (the
latter typically being designed to meet the needs of middle-class workers commuting to and from the
CBD). But, more generally, formal services simply fall short of demand. Both the availability of
services, particularly at peak travel times, and the responsiveness of these services to travel needs (e.g.
the availability of convenient express services) very often fails to meet demand. These problems are
aggravated for the urban poor. The areas where they live are often unfriendly to bus operators: access
is difficult or impossible for all but the smallest bus/paratransit, in particular because suitable roads
are not made, or are not maintained. Regulated fares for services to these areas are often set too low
to be remunerative. Congestion is often chronic. The result in many developing cities is that formal
private operators tend to avoid poor areas, and supply is left to municipally-owned companies, or to
informal providers.
For many of the poor, travel to any particular destination requires multiple trip components. Here are
the words of a Manila secretary, describing her daily, 15-kilometer commute to work:
First she has to wake up extra early about 4:00 a.m. She leaves the house at 5:00 a.m. to get to
work on time (8:00 a.m.) and to avoid rush hours. Her residence is far from the jeepney and bus lines
so she takes three modes of transport: a tricycle to get to the jeepney line, a jeepney to get to the bus
line, and a bus all the way to where she gets off. Her difficulties do not end here. When she gets to
the jeepney line, there is already a long queue of passengers all going to the bus line. Same when she
reaches the bus line, long queue of people going to Manila.
Now here is the most interesting part of her story. The reason why it takes her almost three hours to
get to the office is that buses stop at every bus stop (and sometimes even undesignated stops where
there are people waiting for a ride) to get as many passengers as they can. And since many buses ply
the same route they compete for the same clientele. After picking up passengers at a certain stop, they
will race each other until the next stop. This procedure is repeated over and over again.
The Potential for Competition in Public Transport
The municipal transport market is highly heterogeneous, and in many cases greatly fragmented. As
noted above, travel is for a wide range of journey purposes, between different geographical areas, at
different times, and under different conditions of congestion. Travelers themselves are
heterogeneous, with differing incomes and preferences. Meeting these needs requires both a degree of
flexibility in supply and entry, and a degree of price differentiation.
The degree of service differentiation, and the numbers of players involved, varies across cities. At
one extreme, there might be a monopoly public supplier; at the other, a mix of public/private bus
operators and paratransit, often owned and operated individually. In Manila in 1996, for example, the
road-based public transport system comprised:
Mode No. of Vehicles No. of Routes No. of Terminals

Bus 10,000 89 35
Jeepney 57,000 400 210
Tricycle 61,000 NA 640
Source: Cervero (2000).
The available evidence is that (externalities aside) paratransit competes very effectively with buses.
Costs per passenger-km, and hence fares in a competitive market, are no higher, and it is preferred by
passengers, being easier to access (stopping anywhere), more frequent, easier to get on and off,
usually providing a guaranteed seat once on and being faster (it weaves through the traffic better than
buses). Not surprisingly paratransit progressively takes over from bus services, and in many cities
this has happened and paratransit is the main workhorse, with buses marginalized.
Road-based public transport appears, in practice, to be susceptible to the formation of cartels and
monopolies, particularly where paratransit remains, in formal terms, illegal and outside the rule of
law. There are no notable scale economies in the provision of road-based public transport; indeed, the
threshold for entering the market is low, particularly for paratransit. In response to this threat of
entry, operator and route associations commonly form to protect their members interests. Links to
illegal organizations, and coercion of travelers, is not uncommon. Market access may be controlled
by force with would-be competitors simply run off the road. A solution, in many cases, may simply
be to legalize paratransit and inviting operator associations to tender for the right to operate a
service. This approach has been taken, for example, in Uzbekistan.
As noted above, public sector monopolies are common in the provision of formal bus services. As an
example, in Bangkok, BMTA has a monopoly on all bus services. It operates some services itself,
and licenses private operators on its routes (a clear conflict of interest between its roles as regulator
and operator). Similar situations occur in Chinese cities where the municipality operates one or more
bus companies, then enters into joint ventures with the private sector, usually for premium services.
In Indonesia the state bus operator Damri had a statutory right to operate the main corridor routes in
the larger cities, to the exclusion of private buses; and although the legal basis for this exclusivity has
been removed, it remains in effect.
Tariff Issues
The regulation of fares for formal services varies widely. There are many cities (like Bangkok) where
a uniform flat fare applies to basic services, irrespective of distance. In Chinese cities, a national
urban bus fare is applied by central government. In Indonesia, there are national flat fares for basic
(non air-conditioned) urban bus services, but the financial crisis and devaluation has resulted in
substantial increases in cost which makes current fares unrealistic. Operators have raised their fares
without authority. The regulators have not intervened and are probably grateful they do not have to
bear the political consequences of having to impose an official fare increase in an environment of
social instability. In many cities fares are regulated on a distance scale.
The ways in which fares are set and trips are ticketed, can have important implications for public
transport affordability by the urban poor. When government holds down fares below the market level
to help the poor, a not unusual practice, then the peripheral poor will probably lose out. Their
service will likely decline or be withdrawn, while the inner city poor whose service is already good,
may benefit (their reduced fares more than off-setting the reduced service). The impact of fare
structure on the poor is complicated by the fact that many trips by the urban poor involve multi-leg
journeys, with several interchanges.
Flat fares for basic buses are common, as distinct from premium (e.g. limited stop, air-conditioned)
buses where graduated fares are usually charged. There are generally two motivations for this
approach. First, governments often argue that flat fares are necessary to keep public transport
affordable for the peripheral poor, who need to make long journeys to work. Second, operators find
that they are often essential, given the tendency to over-riding associated with graduated fares, and the
danger of physical violence which bus crews may otherwise be subject to. For informal paratransit
with small vehicles, graduated fares are however far more common, because the crew can control and
enforce them. Where the poor have short journeys, graduated fares will be to their advantage, while
for those who have long commutes to work, market flat fares will be to their advantage. Fares paid
depend not just on levels and structures but also on the ticketing arrangements. For those who
frequently make journeys requiring interchange, the need to re-pay leads to a much higher fare than if
the journeys were made without interchanging. In a deregulated/competitive environment operators
do not collaborate to provide through ticketing, whereas with a high degree of regulation both
integrated ticketing and flat and zonal fares structures are commonplace.
Flat fares lead to some cross-subsidy between short and long trips, which is often their objective.
However, they also tend to reinforce inefficient land uses, and their distributional impact may be less
effective than envisaged. The poor often need to make shorter journeys, they do not solely live at the
urban periphery, and the result is often that paratransit creams off the (high-cost) shorter traffic,
undermining attempted cross-subsidies.
Ease and Cost of Interchange
The cost implications of complex journeys have been referred to above. The physical problems of
interchange can be even more important. Interchange happens, often in the road, in the open,
chaotically with no formal queuing process, and only the fit and active can hope to get a ride.
Sometimes terminals are used, usually operated by the municipality, but these are no panacea.
Vehicles frequently wait until they are full before departing, and at off-peak times this can take two
hours. Arranging good interchanges is a complex, and sometimes costly, business. It needs a party to
take the initiative and a measure of risk. Location is critical, and will usually be where major roads
cross precisely where land values are high and the availability of land is scarce. Moreover,
individual operators often perceive ease of interchange with a rivals services as a commercial threat
and may refuse to use an interchange even if it is provided. What is required are interchanges
provided by the public sector, that has attractions for the operators and users (rest rooms, gas stations,
snackeries etc), but the reality is that in most developing cities, this is likely to remain but an
aspiration.
Externalities
Urban transport markets can produce important externalities in terms of congestion, air pollution, and
public safety. These problems are generally at their greatest where public services are under-
performing, both in the sense of failing to respond to transport needs thus creating a need for an
active paratransit market and in the sense that poorly maintained public buses pose pollution and
accident risks. They also occur where informal paratransit services are prevalent (with illegality
tending to compound the problems).
Paratransit vehicles, in particular, often use dated technology, and may contribute significantly
towards air pollution. Of course, they may not be the only offenders, but their numbers, combined
with their polluting characteristics, often make them a target for action to improve air quality.
Interventions that successfully improve air quality will benefit all city residents, but particularly the
poor. This is because the poor often live and work in the polluted street environment, and they travel
for long periods in non-air-conditioned vehicles.
The arguments for introducing measures to improve safety are similar. The urban poor suffer
proportionately more road accidents than the rich. They spend considerable amounts of time on roads
living, working or travelling. Often walking, or as cyclists, they are particularly exposed to traffic
threats. However, some measures to reduce accidents (for example through quality standards for
providers, or greater regulation of routing) will, like measures to reduce emissions, likely result in
higher fares for paratransit and buses used by the poor.
Traditionally, governments have used planning of service delivery and of the road (and rail)
infrastructure, to mitigate these externalities. But they are often frustrated by institutional problems.
Public transport planning and regulation is often institutionally separate from the planning,
development and management of the roads on which service providers operate. Coordination
between the agencies for each is often weak, with a roads department typically interested in problems
of vehicle congestion and road capacity, and a transportation department seeking to improve service
delivery by bus/paratransit operators.
Improvements in the road network can help or hinder the urban poor. In particular, these
improvements often have negative consequences for the poor who rely heavily on non-motorized
transport (World Bank, Guitink et all, 1994). New construction and upgrading often does not
accommodate the needs of NMT: the absence of overpasses and shoulders is common, and
exacerbates higher NMT-car accident rates, longer NMT trip times, and sometimes even the complete
elimination of NMT traffic. Conversely, many expressways in Malaysia are designed with parallel
segregated motor-cycle networks, offering an attractive service level which is widely used.
Institutional Capacity to Improve Outcomes for the Urban Poor
Limited institutional capacity at the local government level is usually a major constraint on attempts
to improve the performance of the urban transport sector. City transport authorities commonly lack
the administrative and professional capacity to undertake the functions mandated to them. The main
problems they encounter include the following:
There is often no policy framework within which to decide objectives for public transport.
Decisions are made ad hoc, and without clear objectives.
While transport legislation often provides for comprehensive regulation as a solution to urban
transport problems, effective implementation of this regulation is generally beyond the capacity of
the responsible officials. Faced with a policy vacuum, few resources, and complex sectoral
problems, many regulatory agencies resort to purely restrictive regulation and meaningless
bureaucratic processes. Since these are inevitably applied discriminately, the result is very often a
high level of corruption.
Transport regulation is often the responsibility of one or more national agencies, poorly designed
to respond to local issues, and there is often rivalry between responsible agencies.
Public transport is complex. Metro Manila in 1996 had 57,000 jeepneys operating 400 routes,
together with 10,000 buses operating 90 routes and 61,000 tricycles operating taxi-type services
from 600 terminals. It is doubtful if few could comprehend the complexity of this system
sufficiently to regulate it in a manner that improved outcomes for customers who between them
make 12 million public transport trips each day.
A common answer to these problems has been to try to strengthen existing institutions, but this is
seldom straightforward, and is unlikely to produce effective solutions to transport problems when the
underlying institutional structure is inappropriate. Solutions are likely to lie in the direction of
facilitating competitive markets, and concentrated on more effective targeting of subsidies to the poor,
with realism with regard to possible changes the essential prerequisite.
4. THE DESIGN AND IMPACT OF MAJOR PRIVATE SECTOR PROJECTS
Private provision of bus and rail services procured through tendering processes typically reduces
costs. It may, however, have adverse impacts, as authorities favor least-cost concessions which focus
on markets with the greatest ability to pay. If the cost reduction is large enough the poor may benefit
greatly even though there is no specific poverty focus in the design. This raises the issue of the
relative magnitude of competition-induced cost reduction and cross-subsidy which the poor might
lose in a private regime, unless this is specifically built in. In the UK, where bus services outside
London were deregulated, and where it was expected that many services were subject to cross-subsidy
and therefore vulnerable, in the event only about 20% of services required external subsidy. In
developing countries the extent is likely to depend upon the extent to which supply is already
fragmented and the effectiveness of the larger operators.
Concessioning Existing Rail Services
An increasing trend, developed in Brazil, Argentina and the UK has been the concessioning of
suburban rail and metro operations to the private sector. This is now expanding to other cities in other
countries, including Mexico and South Africa. For suburban rail services to contribute effectively to
urban transport requirements, a separate institution is required which is separate form the national
railway system, whose geographical coverage extends to the main commuter catchment area, and
which has some financial independence and therefore power. This may involve corporatization or,
usually better, concessioning of the railway to the private sector. Railways are often reluctant in
practice to give up their suburban operations, yet without this, apparently obvious physical
opportunities which should be attractive for rail operations cannot be effectively exploited.
The Brazilian experience has comprised a three-pronged approach, which appears to be successful:
decentralization of responsibility, concessioning to the private sector, and negative concessions in
which tariffs are defined by government to be affordable to the poor. In effect this creates surface
metros at low cost, which can benefit the poor.
In the early 1990s negative concessions were let for use of the Buenos Aires suburban rail and metro
infrastructure, and an investment program was defined by government for implementation by the
concessionaires, who were granted concessions for 10 and 20 years respectively. By the late 1990s
suburban rail service levels had increased by 50%, ridership increased by 150% with high satisfaction
levels expressed by passengers, fare fraud reduced, the number of workers had been reduced by 80%,
and the scale of government financial support reduced by 60%.
For the metro, revenue, passengers and service level increased by 50% in 4 years. The modal share of
rail as a whole in Buenos Aires increased from 8.5% to 14.6% in just 6 years. Some problems occurred
and the contracts have now been renegotiated, but the strongly positive results speak for themselves.
New-Build Concession (BOT) Projects
When developing country cities come to consider a more active private sector role in solving public
transport problems, however, they are very often looking not for rationalization and greater efficiency
of existing services, but rather for large-scale, banner private sector projects that promise to
revolutionize service provision.
In particular, two forms of concessions have increasingly been grasped as a solution sometimes the
solution, to urban transport problems. These are tolled roads (expressways) and Mass Rapid Transit
systems (fully grade-separated metros or light rail transit - LRT). The two concession forms have
similarities notably their huge physical impact, cost and their revenue stream, but major differences
too. No-one argues that they are primarily targeted at the poor, rather they are targeted at increasing
city productivity (often keeping their city functioning in the face of growth and severe congestion),
with the expectation that this will benefit all city residents, the poor included. But they can have
serious negative effects on the poor both direct and indirect.
Before considering private sector participation experience, we review the experience of public sector
metros as they affect the urban poor. A major research study into metros in developing cities was
carried out a decade ago (Allport et al, 1990). This featured visits and case studies of 21 major cities
worldwide, sought to understand the objectives behind metro projects and established their
performance against expectations. While improving the speed/quality of public transport and
relieving traffic congestion were the two most important reasons, and both would benefit the poor in
common with other public transport users, there was significantly no specific mention at all of
assisting the poor. At first glance this is not surprising, for metros are hugely costly, and are a
premium mode offering high quality at a (relatively high) premium fare. The Mexico City metro
Lines 1-3 were specifically targeted to lower income areas, and adopted low fares, but in common
with other cities, financial realities have forced fares up by many orders of magnitude.
The sole evidence of the impact of metros on the poor is confined to 2 studies, in Cairo for DFID
reported in White et al (1999), and in Medellin. The Cairo study concluded that the poor do use the
metro in substantial numbers, in spite of a substantial fare premium over the bus, because of the large
time savings. The Medellin study was conducted before the metro opening, and concluded that the
poor were unlikely to use the metro, because the route was distant from their travel needs.
Turning to new-build metro concessions, just 4 such projects are operational in developing cities.
These projects have incorporated a range of concession types, with differing degrees of risk transfer
(for details of these projects, see Table A1 in Annex 1.) The current evidence (Allport et al, 1999) on
these projects is that overall construction has been well-managed, and that the systems operate well
albeit that there are maintenance concerns in some cases. Major problems are, however, clear when
the ridership is reviewed. Without exception ridership is low much lower than expectations
(typically one-third). The highest traffic on any of the systems is 150,000 passengers per day (ppd),
approximately one third of the existing Manila Line LRT Line 1 ridership. The result is that the
justification of the projects on efficiency grounds must in all cases be questionable. To the extent this
is true, the trickle-down benefits to the urban poor will be correspondingly small.
Impact on the Poor
Major expressway and metro projects are generally not promoted as helping the poor, but rather as
means to improving city efficiency, with the expectation that there would be trickle-down benefits
which will reach the poor. Such projects should, of course, always be justified in conventional
economic terms, which requires them to attract substantial traffic relieving congestion on the
existing network. Even projects meeting such criteria may, however, negatively affect the poor by
distorting resource allocation when the true public funding commitment becomes appreciated
(reducing funds which could be invested to alleviate poverty). If well-designed, however, they do
have the potential to benefit the poor. This requires project identification and the concession contract
to explicitly target the poor which is currently hardly ever done.
Metro Concessions
There is little recorded evidence about the specific impact of these projects on the poor (leaving aside
the trickle down impact from efficiency gains), but it is possible to put forward hypotheses, and to
test these with knowledge of the existing concession projects (Table 2).
Table 2: Probable Impact of Metro Concessions on the Poor

Proposition Comment
Metros require land, notably at depot sites Need for large area of land imperative,
relocation of squatters often the critical path
e.g. Manila, Bangkok
Metros tend to be built through poor areas displacing Not so (usually in inner city/CBD) other than
the homes and jobs of the poor (who receive depots
compensation and are relocated)
Metros frequently link places between which the poor Sometimes so they are always CBD
do not want/ need to travel frequently; in particular the orientated
city center
Metros provide jobs, most of which are skilled and Construction does provide jobs for the poor
semi-skilled, and therefore exclude the poor (e.g. Manila), but few jobs thereafter
Metro fares are expensive for poor people Always true for BOT concessions
The poor do not benefit from fares concessions which Few fares concessions given, difficult to target
are often given the poor
Metros increase land prices near stations, leading to Probable medium-term impact
displacement of poor people
Metros reduce traffic congestion, and air pollution, These projects attract little ridership, and even
which helps the poor busy metros do not reduce traffic congestion
markedly. Likely to be a marginal impact upon
air pollution. Poor design causes localized
pollution problems (e.g. Bangkok)
Metros facilitate population growth, which is fuelled Some evidence that the construction phase
by in-migration from the provinces does attract migrants, who then remain living
on government lands
Metros consume large amounts of (capital and Undoubtedly so

revenue) funds, which could be better spent on basic
services which the poor need
The available evidence supports the above propositions. Almost all are likely to be adverse for the
urban poor. It seems clear that such projects do not specifically benefit them.
The overall evidence to date, then, is sobering: metro concessions appear unlikely to be justified in
terms of efficiency gains (because they are not good projects). Given that their direct impacts upon
the poor are likely to be negative their overall impact upon the poor is, therefore likely to be
detrimental.
Not only are the poor unlikely to be able to ride MRT, the projects have required huge amounts of
public funding (either up-front or in the form of contingent guarantees). Among public sector metros,
only the Hong Kong system approaches financial viability (in terms of its revenues funding all its
costs, repaying debt and providing an acceptable returns to shareholders), and the great majority of
public sector metros nowhere achieve this. Indeed half do not repay any of the capital cost. Many
expected that private sector concessions would transform this situation, but they have not done so, and
in some cases the situation is worse. Typically these projects will end up with most of their capital
cost needing to be funded by government typically $1bn per project. The real danger of these
concessions as currently conceived is that they inadvertently and profoundly distort the allocation of
government resources. And this may impact hugely and adversely on other social programs with a
higher potential to benefit the poor.
Expressways
The story with urban expressways is somewhat similar to the MRT story. Most urban expressway
concessions have been implemented in Asia. Elsewhere in the world there are few urban expressways,
for environmental or transport policy reasons. Yet, despite huge efforts and much rhetoric few have
actually been implemented just 12 projects in more than a decade of effort in Asia outside of China1
(Allport, 2000).
These projects are typically elevated down existing road/rail corridors, and form part of networks
which comprise radial and circumferential alignments, but not usually penetrating the CBD. Their
supporters argue their efficiency benefits, in keeping big cities functioning in the face of severe
congestion, and implicitly argue that the benefits would trickle down to all sectors of the society. Few
would support such projects as targeting the poor per se. Yet, like MRT projects they can affect the
poor substantially.
Concession agreements are typically of the BOT form with 20-30 year concession periods.
Governments do not accept the need for public support on grounds of the congestion relief, and other
externalities that may be secured. Rather there is an assumption that the projects must be financially
profitable. Accordingly a package of government support is provided, either at the outset, or more
usually during the bidding and negotiation process. Unlike metros, expressways can in principle be
profitable: that is their tolls can in principle fund all their initial and operating costs, repay debt and
reward equity. In practice, however, this is very much the exception: only a few such projects meet
this test of profitability.
The experience with these expressway concessions has on the whole been better than the experience
with metros. This is primarily because any road in a congested city will attract substantial traffic,
unless its tariffs are too high. This is not the case with metros, where the right alignment/ station
locations and tariffs/integration arrangements are critical to use levels.
There has been little research into the impact of expressways upon the poor. Propositions about likely
impact, combined with findings from some known case studies, are set out in Table 3.
1
China is a special case where many expressways are profitable, and urban expressways are quite common.
Table 3: Probable Impact of Expressway Concessions on the Poor

Issue Comment
Economic impact Some projects undoubtedly hugely successful.

Others implemented in isolation of the access
network, less so
Impact of land acquisition on the poor? Substantial land acquisition is necessary,
specifically affecting the urban poor
Must the poor use the expressway? In some countries, parallel free roads are
required, and the poor are not forced to use tolled
expressways. Occasionally this is the case in urban
areas e.g. Manila Skyway
Do the poor use the expressways? Usually not. Buses often use expressways for
longer trips, but the high access times/cost deters
most urban buses
Impact on overall transport strategy Expressways in inner city areas are unlikely to
support a balanced multi-mode transport strategy
Does project support a compact city form Many, by reinforcing existing city corridors, do not
bring land into development between the corridors,
and lead to car-oriented suburbanization, counter to
urban sustainability
Are projects acceptable environmentally? Visual impact can be large, and this may or may
not be perceived as a problem, partly dependent on
the scale of elevated spaghetti in total
Do projects distort public sector funding priorities? This is probably so. Despite the hopes, large public
support is usually required, and becomes apparent
usually late in the day
The overall impact on the urban poor depends upon the effectiveness of individual projects. It is
however clear that expressways do not specifically benefit the poor, other than through their trickle-
down economic impact. To the extent that the homes and jobs of the poor need to be relocated, and
that resource allocation is distorted by unexpected calls on the public purse, the direct impacts on the
poor could be strongly negative.
5. RETHINKING REFORM: STEPS TOWARDS IMPROVING OUTCOMES

FOR THE POOR
In this section, we discuss four main ways in which, in engaging with the private sector, governments
could do a more effective job of improving transport services for the poor. These are:
Rethinking regulation of, and intervention in, markets for transport services.
Improved targeting of low-income users of transport services.
Reforming approaches to private participation in conventional public transport systems.
Rethinking the design and implementation of large-scale private sector projects, such as metros
and expressways.
Making Transport Service Markets Work Better
A key policy issue in helping make urban transport markets work together will be to rethink the role
and regulation of paratransit services. As described above, paratransit services generally arise in areas
not served by formal bus operations, or in response to gaps left by the formal bus services. Where
they have become established they have often spread, and in some cases have become the mainstay of
the public transport system. We have seen that the informal sector already provides the bulk of the
service in most African cities and Indian cities outside the largest 20. It is also currently exploding
in Latin America, for example the Buenos Aires remises and Brazilian pessoas. Defining the role
of paratransit has become the major issue in respect of private supply of public transport services.
It is apparent that paratransit has many advantages, in particular for the poor, and that it is often the
mode of choice of the poor. While many governments seek to ban such services, in practice this is
most unlikely to be desirable per se. However, there may still be reasons for government interventions
in the paratransit sector, on three grounds:
Particularly where paratransit services operate in the black or gray markets, unregulated
competition results in the buses being run off the road, leaving the paratransit cartels with a
semblance of monopoly power. Paratransit operators tend to form operator or route associations.
These often involve internal competition for the right to operate, but they control market access,
sometimes by force, and to some extent fares and service are likely to reflect their monopoly
power. There is a strong case for introducing competition, as this drives fares down substantially
and benefits the poor. This may be by legalizing paratransit and inviting operator associations to
tender for the right to operate a service (as in Uzbekistans cities), or more often by competition
between paratransit and buses. Intervention to secure such competition will help the poor and all
passengers.
In the inner city areas of the largest cities, paratransit itself may be the major cause of congestion.
Pricing is likely to be the most effective mechanism in reducing congestion. Possible approaches
include congestion/pollution charges on providers (for example applied through a licensing
system) potentially combined with a rebate for providers that assist in reducing congestion (such
as larger buses). When busways are introduced, these need to be for the exclusive use of buses (to
avoid their becoming congested), and they can help tilt the balance from paratransit towards bus
operations.
Paratransit vehicles often use old technology which is a major polluter of the air. Emission taxes
or controls are often advocated as a means of reducing pollution (this requiring some form of
licensing of polluting vehicles).
However, in considering both congestion and emissions taxes or controls, careful account needs to be
taken of their potentially regressive effect on the poor.
Improving Targeting
There are 3 broad approaches to targeting:
Targeting Individuals. This is generally preferred for efficiency reasons, because those requiring the
support (the urban poor) should usually receive it. The problem with this approach is that the poor are
often not easily identified.
One case in which an attempt has been made to directly target the poor is the vale transporte scheme
has been in operation since 1978 in Brazil. It covers the whole country and all employees in the
formal sector (in firms with more than 9 employees). Each month each employee advises his/her
employer the number of journeys he/she needs to make by public transport for travel to and from
work. Employees are provided with the appropriate number of vouchers and charged up to 6% of their
salary (less if they have lower travel costs), and the employer offsets the payments against tax. This is
of considerable benefit to the poor.
The reasons for the scheme were two-fold: to help the poor, and to help public transport survive, by
ensuring a stable ridership even when fares were increasing. Having said this, it is not wholly
effective or problem-free for a number of reasons:
An important deficiency is the exclusion of people in the informal sector, where many of the
poorest sell their labor, and whose numbers are large and growing: it is estimated that about half
the commuters boarding buses now pay cash, which indicates the large numbers not covered by
the scheme.
It is not known to what extent it leads to discrimination against longer-distance low-income

commuters in employment, or the extent to which wages are adjusted to compensate.
There are concerns about mis-use of the support and fraud, with reports of the tokens being
traded.
In the present rush of liberalization in Brazil there are pressures to end the scheme. However there are
also strong interests supporting its continuation. This support mechanism is considered important to
Brazils poor, while allowing the bus system to be financially sustainable (the operators are
reimbursed for the tokens collected, and without it there would be resistance to tariff rises and the
need for ongoing subsidy to operations). Such a system is not known of elsewhere and may not work
equally well in all societies.
Targeting Identifiable Groups. In many FSU countries, where the private bus sector is growing, a
practice that still exists is granting free or discounted travel to a wide range of citizens, many of whom
are the urban poor (the elderly, disabled, war veterans etc). This is a direct benefit to the poor (and
some who are not poor) but is being diminished as private buses increase. The private operators often
refuse to carry subsidized passengers, who then become captive to the shrinking municipal/state bus
fleets and trolley/tram services. This method of targeting poor groups in society is disappearing
because governments have no budget (and insufficient administrative capacity) to reimburse the
private operators for accepting the concessions.
A similar approach is common for students (who carry student passes), and sometimes for other
groups (government workers, the army, war veterans etc). The case for providing students with
concessions on distributional grounds is that it allows poor students to secure better education, which
is a sound investment in their future earning power; while the education and prospects of other non-
poor students who benefit is little affected. Overall it is probably a progressive policy.
It is important to the sustainability of public transport that operators are not required to carry the
burden of social policy, and that they are by contract (and where possible) reimbursed for
concessionary fares schemes by the appropriate government departments. This is possible in
Central/Eastern Europe, with well-developed institutions, but is impractical where there is fragmented
supply.
The travel disadvantaged are also often economically disadvantaged, particularly when they are
disabled or frail. The reality in most developing cities is that the fit and active travel, and the
remainder cannot. Developing cities often have many disabled citizens, and for them the reality is that
travel by public transport is impossible. There are usually attempts to provide for the wealthier ones
on new metro systems, and here the reality is that the lifts provided very often serve a broad social
function, and are widely used by those who are encumbered, while few disabled or frail travelers use
them. Accessible transport is unlikely to be provided in an unregulated largely commercial developing
city environment.
Targeting Poor Neighborhoods. The poor are often identifiable by where they live. When they live in
large, concentrated communities these can in principle be targeted for public transport provision2.
There is a range of possibilities:
Where services are prescribed by the authority, the level of service to poor areas can be enhanced
through authority planning and procurement or setting specific service requirements. It may be
that these require a measure of cross-subsidization within a franchise or licensing arrangement,
thus providing support for the poor without direct cost to the public budget. This, however,
requires effective government institutions, and is not possible where these do not exist. Where
services are determined by market forces the outcome is less certain and the poor who live in
areas that are difficult and/or costly to serve are likely to lose out: this points particularly to the
peripheral poor.
An extreme version of this arises when land uses have been planned, and result in extreme
isolation for the urban poor. In South Africa examples exist of rail services supported to carry
people from the black townships to job opportunities.
A much less effective form of targeting involves fares which are the same irrespective of distance
(flat fares). This can assist the problems of the poor who live in peripheral areas. In Brazil,
where the poor often live in favelas at the edges of cities, the norm is for fares to be flat, or almost
flat. This provides low-cost transport for long-distance travelers; but the downside is that short-
distance trips are costly, often leading to paratransit creaming off short-distance traffic and
reducing the effectiveness of the intended cross-subsidy.
To summarize, geographical targeting is possible if large poor areas can be identified and there is the
administrative capacity to procure services targeted to these areas. Student concessions may be a
possibility too. Otherwise efficient targeting is unlikely to be possible.
Expanding Private Participation in Conventional Public Transport
2
Government can also improve their accessibility, by building/paving roads into these areas, allowing buses and paratransit
to serve them.
To date, schemes to increase private participation in the provision of conventional public transport
(buses, suburban rail) have focused primarily on various forms of concessioning of bus and rail
services. A range of other private participation in infrastructure (PPI) opportunities could be
considered, with potential benefits for the poor. These include:
Concessions to implement and manage busways. There are advanced proposals in Latin America
(for example, in Bogota) to manage and expand the busway system using private sector
concessions.
Management of public transport terminals and interchange areas on behalf of local governments.
This could in principle facilitate easier and less costly interchange.
Management and other private sector contracts to maintain roads. The practice of introducing
private sector participation into the roads sector remains embryonic in developing cities. But
there is, in the medium-term, the potential to draw on the private sector to manage road corridors
or areas of the road network. This would benefit the poor along with all other road users.
Designing Better New-Build Megaprojects
Steps are overdue to better align the outcomes of major metro and expressway projects with public
policy requirements, without inadvertently harming the poor. Emphasis is required in two areas:
Government identifying the right projects. A market test should be undertaken to establish the
scale of public funding that would be necessary to make the project implementable, and a cost
benefit test to determine whether it is worth spending.
Applying the PPI process in the public interest.
Identification
In general, projects need to be designed with a much clearer view of government objectives (what
weight is placed upon poverty alleviation?) and constraints, for example:
Available public funding. Contrary to widespread belief, most BOT projects will require large
public funding. Where funds are limited, the appropriateness of implementing massive
infrastructure projects at all needs to be questioned.
The institutional capacity to develop/implement/manage the process. Where this is well-

developed the form of PPI can be different from when this is not yet the case.
The industry players who are likely to be interested in contracting for such projects. To the extent
that these have dominantly short-term interests, then again the approach should differ from the
situation where this is not the case. This applies to metros in particular.
There are two challenges which need to be faced in this area. The first is identification with a pro-poor
focus. A pro-poor project may well be very different from a project identified to maximize financial
payback, which is the usual driving force behind concession agreements. The second is integration of
the project with the existing network, and provision for the expansion of the network. The evidence is
that this does not occur with competing concessionaires, without government planning and requiring
it.
A Pro-poor project will avoid large-scale relocation of the homes/jobs of the poor, locate
interchanges/stations convenient to poor areas, in the case of expressways design stops for buses
to access the expressway and in the case of metros design for buses/paratransit to access stations.
Pro-poor integration with the existing network will feature: for expressways, the provision of off-
project road improvements to ensure convenient access to/from the expressway for buses in
particular. In large cities, the extent to which buses use expressways (hence the extent to which
the poor can benefit from them) is dependent on access difficulty. In Malaysia, buses using
expressways pay concessionary tariffs, which may be regarded as a pro-poor concession, without
significantly adversely impacting upon the project finances. This may be an appropriate measure
elsewhere.
For metros, as far as possible, tariffs should target the poor, and bus routes should be restructured to
feed stations. In practice, two situations occur with differing impacts upon the poor. Most metros
are not designed to be used by the poor, and for these the requirement is to ensure that bus route
restructuring to feed stations (which the poor will not use) does not adversely impact upon them.
Secondly, many suburban rail systems and some metros are targeted to the poor. For these, natural
integration is maximized when tariffs on both the rail system and buses/paratransit are graduated
(increasing with distance). There may be practical constraints upon this, and there may be situations
where flat fares will be justified to benefit the peripheral poor, but usually this can, and should, be
achieved for rail system tariffs at least.
Provisions for the planned development of the network require: for expressways, government to
require inter-operability between expressways operated by competing concessionaires. This will
ensure drivers are not inconvenienced by repeated stopping, and will maximize systemwide traffic.
This requires, as a minimum, compatible tolling equipment.
For metros, it is essential that the government secures integration between competing
concessionaires and planned future projects; for without it ridership will be far lower than is required.
As a minimum this requires that the arrangements for physical integration via common stations takes
place, and that metro tariffs are graduated, to encourage natural integration.
PPI Process
It is a paradox that the forms of concessions that would potentially benefit the poor substantially,
which are low-cost and would be much less demanding to implement and regulate are, in practice, not
implemented. In the MRT sector, busway concessions offer this prospect, and it is likely that such
concessions will begin to operate soon (e.g. in Bogota); they hold substantial promise and are likely to
benefit the poor substantially. In the roads sector, it is possible that road corridor/area management
concessions will develop, with reward incentivized by performance targets. But this is some time
away, and is unlikely to appear until transport companies develop with the interest and skill to manage
the network.
Looking ahead, it is clear that massive infrastructure concessions are here to stay, with a considerable
backlog of projects at various stages of planning. The requirements to make the process operate better
are briefly summarized, their main significance for the poor being that if they are implemented these
projects will not unexpectedly pre-empt resources from pro-poor programs:
Governments should grant concessions only after it is clear that the project is justified in the
above identification terms (many governments grant concessions readily, and find the city locked
up by an accumulation of concessions, many unimplemented, which constrain their action

severely).
Where institutional administrative and professional capacity is a constraint, it is probable that

large projects should be implemented under turnkey design/construct contracts, and (when the
risks are much more controllable) letting operating/maintenance concessions. Where capacity has
developed, full BOT concessions may be let with more confidence.
When relocation of people and activities is required, then full compensation should be paid
promptly, and relocation planned for. Most countries now have codes of practice, encouraged by
the major development banks, which are enforced in this area.
6. CONCLUDING REMARKS
The answers in the pro-poor agenda are not simple or straightforward, and this is the reality of the
situation. If there are simple messages they are the following:
Do what is institutionally possible to create competitive public transport markets, aligning the
competition and regulatory regime to the governments administrative and professional capacity.
If possible target service to low-income areas.
Beware megaprojects, which as currently conceived do little for the poor, and can inadvertently
harm them substantially. To improve their outcomes, government must identify these projects,
specify their pro-poor credentials (financial payback should not be the sole factor determining
project identification), and control the PPI process. They may then actually benefit the poor, as
well as achieve economic objectives.
Be more imaginative in applying the PPI process. The approach should be aligned to the realities
regarding government capacity and the motivations of the private sector players. Full BOT
concessions are likely to have a limited role in many environments. Negative concessions may
achieve pro-poor objectives, justified by the external benefits created.
Do what is possible to concession existing rail services, using the Latin American model, in
which institutional reform and private sector concessions are combined with tariffs defined by
government to be affordable to the poor.
A pro-poor urban transport strategy will likely focus on the components summarized in Table 4.
Table 4: A PRO-POOR PPI STRATEGY
Objective Policy
Make Markets Work Better Introduce competition to paratransit
Re-think the role of paratransit Consider congestion/ pollution charges, where paratransit is the
primary cause of congestion
Secure more competitive markets Implement the appropriate competition/ regulatory regime in the light
of administrative and professional capacity
Provide for regular tariff increases (holding down tariffs, leading to
uneconomic operations, unlikely to help the poor)
Introduce graduated tariffs where possible. These will usually benefit
the poor (but may not be feasible)
Improve Targeting of the Poor e.g. vale transporte in Brazil Not likely to be widely applicable
Individuals
Identifiable groups e.g. Requires effective institutions, supply which is not fragmented and
students public funds to reimburse operators
Poor neighborhoods Procure bus services to target large, poor areas. Considerable
potential (this requires effective planning/ regulation capacity)
Expand the Boundaries of PPI
Suburban rail concessioning Requires institutional separation and financial autonomy. Then,
effective with government setting tariffs affordable by the poor
Busway concessions Likely to be trialed soon. Acceptability of busways and paratransit
are key issues. Where possible, likely to be pro-poor
Other Management of public transport terminals, road management
concessioning etc. The latter is likely to be some time away
Design Better Infrastructure
Concessions
Ensure projects achieve public policy
Government should identify projects, and determine pro-poor
objectives without inadvertently provisions). Then, there are prospects for trickle-down and other
harming the poor benefits for the poor, without pre-empting other potentially pro-poor
programs
Improve the PPI Process Grant concessions with care
Develop the process in step with Determine the appropriate PPI modality (maybe not BOT)
government capacity to manage it Ensure that relocation and compensation is carried out according
to best practices
REFERENCES
Allport et al, 1990 Study of Mass Rapid Transit in Developing Countries by RJ Allport and
JM Thomson, Halcrow Fox, TRRL Contractor Report 188, 1990
Allport et al, 1998 Realising the Potential of MRT Systems in Developing Cities by RJ
Allport and TJG Bamford, Halcrow Fox, 8th World Conference on Transport Research,
Antwerp, July 1998
Allport, 2000 Developing Best Practices for Promoting Private Sector Investment in
Infrastructure: Roads, by RJ Allport, Halcrow Fox for Asian Development Bank (TA
No.5753-REG), 2000
Bannister et al, 1993 Spatial Inequalities and the Provision of Public Transport in Latin
American Cities, by D Banister and P Camara, Transport Reviews, 1993 Vol 13, No 4
Cervero, 2000 Informal Transport: Mobility Needs of the Developing World, for UNCHS,
January 2000
Fouracre et al, 1999 Accessibility and the Urban Poor, by PR Fouracre, A Astrop and D
Maunder, TRL, July 1999
Kranton, 1991 Transport and the Mobility Needs of the Urban Poor An Exploratory Study,
by Rachel Kranton, The World Bank, November 1991
White et al, 1999 Impacts of the Cairo Metro, by Prof P White et al
World Bank, Guitink et al, 1994 Non-Motorised Transport: Confronting Poverty through
Affordable Mobility, by P Guitink, S Holste and J Lebo, The World Bank, April 1994
ACKNOWLEDGEMENTS
The author appreciates the assistance of Peer Reviewers who have commented on drafts of
this report: Ken Gwilliam et al (The World Bank), David Bayliss, Phil Fouracre, Richard
Meakin, and Nicola Shaw. In addition valuable insights have been provided by: Alan
Armstrong-Wright, Philip Cornwell, Richard Iles, Dave Maunder and Peter White.
Annex 1: NEW-BUILD METRO CONCESSIONS IN DEVELOPING CITIES
Just 4 such projects are operational in developing cities (Table A1). These provide the
evidence for the approach as practised to date:
TABLE A1: NEW-BUILD METRO CONCESSIONS
Characteristic Kuala Lumpur Kuala Lumpur Bangkok BTS Manila MRT3

STAR PUTRA (Green Line)
Concession BOT 30+30 year BOT 30 + 30year BOT BLT 25 year
concession concession concession
Competitive award? Competition for 6-week Negotiated
different competition contract, 1
specification for a project bidder qualified
systems which
changed
completely
Project 12+15 kms in 2 29 kms 24 kms in 2 17kms
(all fully segregated) phases automated lines
technology
Opened 1996, 1998 1998-99 December December 1999
1999
Capital Cost $1.3bn $ 2.3bn $ 1.3bn $0.7bn
Traffic 60 (Oct 1999) 110 (March 160 (March 40 (line not yet
000s per weekday 2000) 2000) complete)
Revenues/operating costs 1.0 0.5 Not known Not known (<1)
Environmental impact Minimal mostly Not large, mostly Elevated, Mostly at-
at-grade along elevated, tunnel viaduct grade/elevated,
existing corridors in centre, no impressive, in the middle of
catenary Silom section wide highway,
of route so little impact
intrusive,
leading to
serious
concern about
air pollution
trapped under
stations
Identified impact upon
the poor Construction
Construction - Some squatter Construction work. 3300
relocation near work squatter families
Poor dont ride it Bangsa Poor dont relocated at
As riders Poor dont ride it ride it depot
- - Little impact Poor dont ride
Other direct impact it
Little impact
These projects have incorporated a range of concession types, with differing degrees of risk
transfer. The two KL projects are very different, with STAR involving more risk transfer than
PUTRA. STAR was a foreign-promoted project along a disused rail corridor, using conventional
technology; while PUTRA was a locally-promoted project using state-of-the-art automated
technology. The Manila MRT3 project uses financial engineering to allow the project to be
constructed without large government up-front costs (but with payments deferred over the next 25
years); and it guarantees the contractor a 15% IRR on the lease payments, even if there is a cost
overrun. The Bangkok BTS project is a full risk-taking BOT concession, with no government
financial support other than provision of some land and tax breaks.
The test of the approach is the efficiency achieved in implementation and operations and
critically the traffic attracted and benefits secured. The evidence is that overall construction has
been well-managed, and that the systems operate well albeit that there are maintenance
concerns for two of the projects. Major problems are, however, clear when the ridership is
reviewed. Without exception ridership is low much lower than expectations (typically one-
third). The highest traffic on any of the systems is 150,000 passengers per day (ppd),
approximately one third of the existing Manila Line LRT Line 1 ridership. The result is that the
justification of the projects on efficiency grounds must in all cases be questionable. To the extent
this is true, the trickle-down benefits to the urban poor will be correspondingly small.
Experience to date is that some, or in the case of MRT many, projects are unlikely to be justified
economically. It is likely that the impact of PPI has been to control cost, and probably reduce it,
while reducing the implementation time relative to the public sector alternative. But:
Cost reduction per se is not always desirable. In the case of MRT projects it has sometimes
been achieved by purchasing low-cost and low-specification equipment, ill-suited to the
task in hand.
Oftentimes, construction has not planned for the medium and long-term, creating problems
for future upgrading as incomes and aspirations rise.
For MRT, the major problem is that ridership/ revenues, congestion relief and economic
benefits are low far lower than forecast.
Given this the impact of these MRT projects on the poor are almost exclusively negative.

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TRANSPORT SERVICES FOR THE URBAN POOR

Infrastructure for Development: Private Solutions and the Poor

Table 1: Characteristics of the Travel Options .......................................................................................8

Table 2: Probable Impact of Metro Concessions on the Poor..............................................................17

Table 3: Probable Impact of Expressway Concessions on the Poor ....................................................19

Table 4: A PRO-POOR PPI STRATEGY ............................................................................................26

2. DEMAND AND THE ABILITY TO PAY

Relationship between city size and demand for public transport

Willingness and Ability to Pay

3. THE SUPPLY OF TRANSPORT SERVICES TO THE POOR

Table 1: Characteristics of the Travel Options

Mode Walk Bicycle Paratransit Minibus/ Busway LRT Metro Suburban

Fare 0 0 Yes Yes Yes Yes Premium fare Yes

Mode Walk Bicycle Paratransit Minibus/ Busway LRT Metro Suburban

The Potential for Competition in Public Transport

Mode No. of Vehicles No. of Routes No. of Terminals

Ease and Cost of Interchange

Institutional Capacity to Improve Outcomes for the Urban Poor

4. THE DESIGN AND IMPACT OF MAJOR PRIVATE SECTOR PROJECTS

Concessioning Existing Rail Services

New-Build Concession (BOT) Projects

Impact on the Poor

Table 2: Probable Impact of Metro Concessions on the Poor

Metros consume large amounts of (capital and Undoubtedly so

Table 3: Probable Impact of Expressway Concessions on the Poor

Economic impact Some projects undoubtedly hugely successful.

5. RETHINKING REFORM: STEPS TOWARDS IMPROVING OUTCOMES

Improved targeting of low-income users of transport services.

Reforming approaches to private participation in conventional public transport systems.

Making Transport Service Markets Work Better

There are 3 broad approaches to targeting:

It is not known to what extent it leads to discrimination against longer-distance low-income

Expanding Private Participation in Conventional Public Transport

Designing Better New-Build Megaprojects

Applying the PPI process in the public interest.

The institutional capacity to develop/implement/manage the process. Where this is well-

up by an accumulation of concessions, many unimplemented, which constrain their action

Where institutional administrative and professional capacity is a constraint, it is probable that

Table 4: A PRO-POOR PPI STRATEGY

White et al, 1999 Impacts of the Cairo Metro, by Prof P White et al

Annex 1: NEW-BUILD METRO CONCESSIONS IN DEVELOPING CITIES

TABLE A1: NEW-BUILD METRO CONCESSIONS

Characteristic Kuala Lumpur Kuala Lumpur Bangkok BTS Manila MRT3

Revenues/operating costs 1.0 0.5 Not known Not known (<1)

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