BEYOND CENTRALIZED FRANCHISING
Rethinking Public Transport Governance through Graduated Devolution
Varsolo Sunio · Sandy Gaspay · Kris Francisco · Thomas Stringer
University of Asia and the Pacific · Philippine Institute for Development Studies
University of the Philippines · Polytechnique Montréal
BACKGROUND
Road-based public transport in the Philippines:
a liberal, highly centralized system
Road-based public transport (buses, jeepneys) is driven overwhelmingly by private operators. Government's role is franchising and regulation — not planning or provision.
Private
Operators
apply for franchise
Certificate of
Public Convenience
(CPC)
LTFRB
national regulator
Local Service
Provided
minimal LGU role
The result: a system well suited to fiscally constrained contexts, but strained where transport problems are systemic.
Fragmented, uneven service
Operators chase profitable routes; low-demand areas see gaps in coverage and poor coordination between independent operators.
Limited local responsiveness
Franchising authority sits with national agencies (LTFRB), leaving LGUs with little capacity to plan or manage transport in their own jurisdictions.
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Road-based public transport in the Philippines:
Jeepney and buses
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STUDY OBJECTIVES
01
Diagnose
Examine the strengths, limitations, and contextual performance of the incumbent liberal–centralized governance regime.
02
Design
Develop a functional and institutional framework for a coordinated–devolved regime, built on graduated levels of devolution.
03
Chart pathways
Identify context-sensitive transition pathways for LGUs to progressively assume governance functions based on readiness and scale.
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LITERATURE
Positioning the current study in the literature
Level of Analysis | Concept | Analytical Focus | Illustrative Examples | Primary Emphasis |
Macro (Political Economy) | Degree of state involvement | Mode of coordination between state and market; overarching institutional logic | Liberal vs. coordinated systems | This paper |
Jurisdictional | Degree of devolution | Distribution of authority across levels of government | Centralized (national-led) vs. devolved (local-led) | This paper |
Sectoral (Institutional Arrangements) | Regulatory regime | Rules and instruments governing service provision | Franchising, service contracting, competitive tendering | Most existing studies |
Operational (Service Delivery) | Ownership and competition model | Organization of service provision and market structure | Public operation, PPPs, private monopoly, competition for the market | Most existing studies |
This study centers on the macro and jurisdictional dimensions — how governance authority is distributed and coordinated — while most existing literature focuses on sectoral and operational arrangements.
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CONCEPTUAL FRAMEWORK
Two dimensions define a governance regime
Mode of coordination (liberal ↔ coordinated) and distribution of authority (centralized ↔ devolved) combine into four ideal-type regimes.
Liberal–
Devolved
Market-driven; local authority
Coordinated–
Devolved
The paper's proposal
Liberal–
Centralized
Incumbent PH regime
Coordinated–
Centralized
e.g., national rail (DoTr)
Local
National
Liberal
Coordinated
Degree of government involvement
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Degree of devolution to local governments
CONCEPTUAL FRAMEWORK
Governance functions and functional levels
The study adopts the concepts of governance functions and functional levels to structure devolution and coordination.
Functions and
functional levels
Governance functions are broad categories of public transport activities or responsibilities.
Functional levels refer to groupings of functions according to increasing institutional complexity, coordination intensity, and governance responsibility.
Devolution
Devolution involves the transfer or decentralization of specific responsibilities from the national government to local governments.
Core devolvable functions include route and network planning, fare-setting, and franchising — traditionally concentrated within DoTr and LTFRB.
Coordination
Coordination implies the assumption of governance functions.
A coordinated regime is one in which the government assumes a more active “system manager” role by taking responsibility for functions that require integration across operators, routes, and jurisdictions.
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CONCEPTUAL FRAMEWORK
Devolution- and coordination-related functions
Illustrative public transport governance functions associated with each type.
Devolution-related functions
Coordination-related functions
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CONCEPTUAL FRAMEWORK
Increasing complexity, increasing coordination
As governance functions grow more complex, they typically require greater devolution and coordination capacity.
Degree of Devolution /
Coordination
Complexity of Governance Functions
Foundational
Basic responsibilities that all LGUs are expected to perform.
Developing
Additional responsibilities assumed once foundational functions are performed consistently and effectively.
Established
More sustained coordination requiring technical expertise and institutional maturity.
Advanced
High-order responsibilities requiring substantial administrative authority, financial resources, and governance capacity.
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DATA & METHODS
Interviews and surveys across the governance chain
19
respondents across national agencies,
local governments, and transport
service entities
Semi-structured interviews + Google Forms survey, organized around the study's three objectives; thematic analysis combined manual coding with AI-assisted pattern identification.
3
National Agencies
DoTr · LTFRB · DILG
14
Local Government Units
Provinces, cities & municipalities
2
Transport Service Entities
Transport cooperatives
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DATA & METHODS
Respondents, by sector and mode of participation
Sector | Respondent | Participation Details |
National Government Agency | Department of Transportation (DoTr) | Interviewed on February 12, 2026; no survey response |
Land Transportation Franchising and Regulatory Board (LTFRB) | Interviewed on January 20, 2026; no survey response | |
Department of Interior and Local Government (DILG) | Interviewed on May 18, 2026; no survey response | |
Local Government | Bataan Province | Interviewed on February 3, 2026; with survey response |
Batangas Province | Interviewed on March 5, 2026; no survey response | |
Mindoro Province | Survey response submitted on February 12, 2026; no interview | |
Cebu Province | Interviewed on January 13, 2026; no survey response | |
Surigao del Sur Province | Interviewed on February 20, 2026; no survey response | |
Pasig City (Metropolitan HUC) | Interviewed on March 6, 2026; with survey response | |
Baguio City (Non-metropolitan HUC) | Interviewed on March 16, 2026; with survey response | |
Iloilo City (Non-metropolitan HUC) | Interviewed on January 29, 2026; no survey response | |
Batangas City (Capital City / Non-HUC) | Survey response submitted on March 1, 2026; no interview | |
Legazpi, Albay (Capital City) | Survey response submitted on March 5, 2026; no interview | |
Presentación, Camarines Sur (Municipality) | Survey response submitted on March 4, 2026; no interview | |
Bautista, Pangasinan (Municipality) | Survey response submitted on March 4, 2026; no interview | |
Subic, Zambales (Municipality) | Survey response submitted on March 5, 2026; no interview | |
Buhi, Camarines Sur (Municipality) | Survey response submitted on March 3, 2026; no interview | |
Transport Service Entities | South Metro Transport Cooperative | Interviewed on April 15, 2026; no survey response |
Lingayen-Dagupan Transport Cooperative | Interviewed on April 28, 2026; no survey response |
List of respondents, sector classification, and mode of participation (n = 19).
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DATA & METHODS
Where our LGU respondents are located
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RESULTS · CODED THEMES
Coded themes: the liberal regime
Theme | n | Illustrative Quote |
L-S1: Reduces fiscal burden on government / mobilizes private capital | 12 | “Reduced fiscal burden on the government. Because operators shoulder the costs of vehicles and day-to-day operations, the state is able to concentrate its resources on regulation, oversight, and policy development...” LGU-07 |
L-S2: Standardized, replicable, easy-entry business model | 8 | “Proven business model, brand recognition, standardized systems and training, economies of scale...” LGU-05 |
L-S3: Enables entrepreneurial / livelihood opportunity and market responsiveness | 7 | “...market responsiveness, entrepreneurial and livelihood opportunities.” LGU-12 |
L-S4: Retains basic state oversight (fares, routes, compliance) | 5 | “...the state is able to concentrate its resources on regulation, oversight, and policy development rather than direct service provision.” LGU-07 |
L-W1: Profit-driven allocation → coverage gaps in low-demand/rural areas | 6 | “Profit-driven service allocation. Operators prioritize commercially viable routes, leaving low-demand or socially necessary areas underserved.” LGU-07 |
L-W2: Fragmentation / lack of route, schedule, and fare coordination | 6 | “Fragmentation of services. Multiple small operators often lead to disorganized and overlapping routes, resulting in inefficiencies and traffic congestion.” LGU-09 |
L-W3: Weak monitoring / enforcement capacity — allows deviation or “gaming” | 6 | “If a local government lacks the data infrastructure to track bus performance, the operators can ‘game the system.’” LGU-04 |
L-W4: Poor risk allocation to operators / inadequate crisis-time support | 2 | “Poor risk allocation. Operators may reduce service, shorten routes.” LGU-11 |
Strengths and weaknesses of the liberal regime (labeled L-Sx and L-Wx, respectively) followed by strengths and weaknesses of the centralized regime (labeled C-Sx and C-Wx, respectively), where x indexes the theme number within each category.
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RESULTS · CODED THEMES
Coded themes: the centralized regime
Theme | n | Illustrative Quote |
C-S1: Insulates decisions from local political pressure | 10 | “It's harder to politicize the process when the LGU itself isn't the one granting the franchise... that protects the LGU office from blame.” LGU-07 |
C-S2: Uniform national standards / regulatory consistency | 3 | “Standardized regulatory policies, fare policies — since there is a national oversight.” LGU-12 |
C-S3: Concentrated, clear institutional authority | 2 | “Franchising regime key strength is its power to prescribe and regulate routes of service under Sec. 5(a).” LGU-02 |
C-W1: Bureaucratic rigidity / slow, inflexible approval processes | 4 | “At present, on-demand changes in the public utility vehicle (PUV) route structure remain infeasible due to the absence of clear policies.” LGU-07 |
C-W2: Weak responsiveness to local context (“one-size-fits-all”) | 3 | “One-size-fits-all, not so responsive to the local... for Lingayen/Dagupan, only certain peak hours are viable.” TSE-02 |
C-W3: Limited local ownership / accountability; political constraints | 2 | “Political and governance constraints.” LGU-02 |
Strengths and weaknesses of the liberal regime (labeled L-Sx and L-Wx, respectively) followed by strengths and weaknesses of the centralized regime (labeled C-Sx and C-Wx, respectively), where x indexes the theme number within each category.
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RESULTS · LIBERAL REGIME
The liberal regime exhibits three key strengths
01 Low Fiscal Burden
The liberal regime enables low public fiscal burden through private provision, as the costs of fleet acquisition, operations, and maintenance are largely borne by private operators rather than the state — allowing government to extend services without significant capital outlays.
“By placing financial and operational risk primarily on private operators, the framework allows for the extension of network coverage and service availability without requiring the full fiscal burden to be borne by the public sector.”
LGU-09
02 Entrepreneurial Capacity
The regime facilitates the mobilization of entrepreneurial capacity and livelihood generation, drawing in a wide range of private actors — from small-scale operators to larger firms — who have a direct financial stake in service provision.
“By leveraging private sector participation and reducing the financial burden on government, it creates a framework that balances entrepreneurial initiative with regulatory oversight.”
LGU-07
03 Operational Simplicity
The liberal model benefits from operational simplicity coupled with basic regulatory oversight, wherein standardized and replicable business models facilitate relatively easy entry and operation, while the state retains formal authority over routes and fares.
“Franchising regime work[s] more effectively on operational simplicity where operators can be taught with simple processes.”
LGU-02
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RESULTS · LIBERAL REGIME
Three fundamental limitations accompany these strengths
01 Profit-Driven Allocation
The system is characterized by profit-driven service allocation, where operators prioritize commercially viable routes, resulting in gaps in coverage and unreliable provision in low-demand or socially necessary areas.
“Operators prioritize commercially viable routes, leaving low-demand or socially necessary areas underserved.”
LGU-07
“Demand is thin or dispersed in rural or peri-urban areas... public service obligations exceed commercial viability.”
LGU-12
02 Fragmented Coordination
The regime leads to fragmentation and lack of system coordination, as multiple independent operators function without effective integration, producing overlapping routes and inefficient service patterns.
“We do not have a reliable transportation and route system... no scheduled route, route numbering, or time-scheduled route and many advanced transportation systems.”
LGU-02
03 Weak Enforcement Capacity
Operational simplicity is a double-edged sword: limited regulatory and institutional capacity — weak monitoring, data gaps, enforcement challenges — reduces the state's ability to ensure compliance with service standards.
“You can impose ten KPIs, but if you're not providing anything in return, there's no real incentive mechanism to support compliance.”
NGA-02
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RESULTS
Summary: Strengths and failures of the liberal regime
Dimension | Definition | Strengths | Failures |
Public Fiscal Burden | The extent to which government resources are required to finance and operate public transport services. | Low fiscal burden through private provision; minimal need for public capital investment; financial risk shifted to private operators. | Under-provision of socially necessary but unprofitable services; limited public capacity to intervene due to fiscal and policy constraints. |
Economic Participation and Livelihood Generation | The extent to which the system enables participation of private actors and generates economic opportunities. | Strong mobilization of entrepreneurial capacity; livelihood opportunities; motivated ownership. | Uneven operator capability; income instability; incentives may prioritize profit over service quality; potential oversupply in profitable routes. |
Service Equity (Accessibility and Coverage) | The degree to which transport services are distributed fairly across geographic areas and population groups. | Service expansion in high-demand areas; broad participation of operators increases service availability where demand exists. | Profit-driven allocation leads to underserved rural and low-demand areas; service gaps, route abandonment, and unreliable service. |
System Coordination and Integration | The extent to which transport services function as a coherent and integrated network. | Potential for integration through franchising (route control, fare setting, unified systems). | Fragmented operations; lack of route rationalization, scheduling, and fare integration; oversupply and undersupply across routes. |
Governance Simplicity and Oversight | The extent to which the system operates through standardized, easily replicable arrangements with basic regulatory control. | Operational simplicity; ease of entry and replication; standardized business models; presence of basic regulatory oversight. | Weak enforcement and monitoring; limited data systems; operators can “game” the system; planning gaps and institutional constraints. |
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RESULTS · CENTRALIZED REGIME
The centralized regime exhibits several key strengths
01 Policy Stability
Centralization enables a more consistent, long-term policy direction, insulated from local patronage or short-term political interests — reducing the risk of politically driven route allocation.
“It's harder to politicize the process when the LGU itself isn't the one granting the franchise; it stays more technical.”
LGU-07
“If your ally loses the next election, you could be in trouble — that's what happened in some areas in Cebu.”
TSE-01
02 Regulatory Consistency
National-level control facilitates standardized fare structures, vehicle requirements, and compliance mechanisms, enabling efficient implementation of nationwide programs such as modernization initiatives.
“It provides a standard nationwide — LTFRB doesn't just govern one province, it's nationwide.”
TSE-02
“It's good that there's one regulator, since it creates a standard throughout the country.”
TSE-02
03 Institutional Authority
The regime benefits from clarity and concentration of authority within a single institution, reducing fragmentation in decision-making and providing a clear mandate over franchising and policy implementation.
“It's easier to hold it accountable through corporate structures rather than political ones.”
NGA-02
“Mayors are the ones who end up answerable, not LTFRB.”
LGU-07
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RESULTS · CENTRALIZED REGIME
These strengths come with significant limitations
01 Bureaucratic Rigidity
Policies may be stable, but they are difficult to adapt — changes to fares, routes, or regulatory frameworks require lengthy approval processes, limiting the system's ability to respond to evolving needs and constraining reform.
“Fuel prices keep increasing, so you'd only be asking for a one- or two-peso fare increase to recover costs — but it's very difficult to get government approval for that.”
TSE-01
02 Weak Local Responsiveness
With minimal LGU participation, national agencies often lack detailed knowledge of local travel patterns and needs, resulting in misaligned routes and outdated franchising structures.
“It often came down to who applied — without due consideration of local conditions.”
LGU-12
“Small business transactions shouldn't need approval from a very high or distant office.”
TSE-02
03 Limited Local Ownership
The regime suffers from limited local ownership and accountability, as LGUs have little incentive or authority to actively manage or improve transport services within their jurisdictions.
“We're a bit puzzled by the idea that LGUs should shoulder this function when there's no clear basis showing it should be the LGU doing it.”
LGU-12
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RESULTS
Summary: Strengths and failures of the centralized regime
Dimension | Definition | Strengths | Failures |
Policy Stability | The extent to which transport policies are consistent, predictable, and insulated from short-term political influence. | Stable policy direction and insulation from local political pressures; continuity in long-term planning; predictable regulatory environment. | Limited local ownership and accountability; reduced adaptability to local political and development priorities. |
Regulatory Consistency | The degree to which rules, standards, and regulatory practices are applied uniformly across jurisdictions. | Uniform standards in fares, vehicle requirements, and compliance; consistent regulatory application across regions. | Weak responsiveness of regulations to local conditions; limited sensitivity to geographic and demand variations. |
Institutional Authority and Control | The concentration of governance functions and decision-making power within a central authority. | Clear mandate and concentration of authority within a single institution; reduced fragmentation in decision-making. | Bureaucratic rigidity and slow decision-making; lengthy approval processes; limited flexibility for innovation and reform. |
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Toward a coordinated–devolved regime
These limitations motivate an alternative that keeps the strengths of central oversight while enabling local responsiveness and coordination.
01
Classify Functions
Group each devolution- and coordination-related function into one of four functional levels — foundational, developing, established, or advanced.
02
Align by Jurisdiction
Match these functional levels to jurisdiction type — metropolitan areas, highly urbanized cities, and provinces — based on scale and capacity.
03
Test Against Evidence
Present how LGU respondents themselves classified each function, grounding the framework in real-world capacity and readiness.
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RESULTS
How respondents classified each function
Function | Foundational | Developing | Established | Advanced | n | Modal Classification |
Transport planning | 8 | 1 | 0 | 0 | 9 | Foundational |
Land-use planning | 9 | 0 | 0 | 0 | 9 | Foundational |
Franchising | 2 | 2 | 4 | 1 | 9 | Established |
Fare-setting | 2 | 5 | 1 | 1 | 9 | Developing |
Centralized fare collection | 0 | 4 | 4 | 1 | 9 | Established |
PUV fleet procurement and renewal (leasing) | 0 | 1 | 2 | 5 | 8 | Advanced |
Network-wide monitoring of PUV performance | 2 | 3 | 2 | 2 | 9 | Developing |
Subsidy provision | 1 | 0 | 3 | 5 | 9 | Advanced |
Partial contracting | 0 | 4 | 2 | 2 | 8 | Developing |
Direct operation | 0 | 0 | 0 | 8 | 8 | Advanced |
Full network-wide service contracting | 0 | 0 | 2 | 6 | 8 | Advanced |
Respondents (14 LGUs) classified each of 11 governance functions as Foundational, Developing, Established, or Advanced. Not all respondents answered every item; “n” is the number who classified that function, and modal classification is the most frequent response.
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RESULTS
Classifying functions by functional level
Functional Level | Function | Rationale for Classification |
Foundational | Transport and land-use planning | Core statutory responsibility of LGUs; already institutionalized through LPTRP requirements and necessary for all higher-order functions. |
Network-wide monitoring of PUV performance | Technically accessible using existing tools (e.g., GPS); supports evidence-based planning and regulation. | |
Subsidy provision | Can be mobilized during emergencies or service gaps; requires limited institutional complexity but fiscal flexibility. | |
Developing | Fare-setting and adjustment | Requires analytical capacity (cost structures, demand) and regulatory judgment; builds on planning and monitoring functions. |
Partial service contracting | Introduces contractual governance on selected routes; requires procurement, performance monitoring, and enforcement capabilities. | |
Established | Franchising authority or delegated franchising | Entails regulatory control over market entry and service design; requires legal authority, institutional maturity, and enforcement capacity. |
Direct service operation | Involves asset ownership and operational management; feasible only for resource-capable LGUs. | |
Centralized fare collection | Requires system integration and coordination across operators through automatic fare collection systems (AFCS); involves institutional and technical complexity (e.g., clearinghouse systems). | |
Advanced | Full network-wide service contracting (gross contracts) | System-level transformation requiring sustained funding, strong contract management, and integrated planning. |
Fleet procurement and leasing | Capital-intensive function involving financial structuring, asset management, and long-term risk allocation. |
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RESULTS
Aligning functional levels with jurisdiction type
Ideal is the level an LGU should aim for; realistic is what it can achieve given current capacity. Modal classifications align closely between the two.
Foundational
Developing
Established
Advanced
Ideal
3
10
Realistic
2
4
7
Metropolitan
Ideal
3
6
4
Realistic
1
3
7
2
HUC
Ideal
1
7
2
3
Realistic
2
6
5
Province
0
2
4
6
8
10
12
Number of respondents
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Note: n = 13 of 14 LGU respondents answered this item
RESULTS
Current status vs. target level, by jurisdiction
Most LGUs sit at the foundational level today — but the appropriate target level differs sharply by context.
Foundational
Developing
Established
Advanced
Province far from
metro area
Province near
metro area
Highly urbanized
city
Metropolitan
area
Current level
Target level
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METHODOLOGICAL NOTE
A note on the figure
Three clarifications on how the current and target functional levels on the previous slide were derived.
1
Current levels are the authors’ interpretation
The current functional level shown for each jurisdiction type (the filled circles) reflects the authors’ interpretive assessment of prevailing practice — not a direct empirical finding. Respondents were not asked to characterize their own LGU’s present functional level in these terms.
2
Provincial subtypes are an analytical refinement
The survey and interview data underlying the expected (ideal) functional level treated “province” as a single, undifferentiated category. The near-metro / far-from-metro distinction is the authors’ refinement, made to capture variation in system complexity — not a distinction respondents were asked to draw.
3
Near-metro province figures are an extension, not a finding
Survey- and interview-derived expectations correspond to the “province far from a metropolitan area” case. The “province near a metropolitan area” case is the authors’ extension of that finding — informed by the same logic, but not independently tested against respondent data.
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THE BIGGER PICTURE
One country, several governance regimes
Not everything should devolve. Regimes are matched to context, size, and complexity.
Metropolitan areas
(Metro Manila, Cebu, Davao)
Coordinated–
Devolved
Highly urbanized cities
Coordinated–
Devolved
Provinces near metro
areas
Coordinated–
Devolved
Provinces, low density
Liberal–
Devolved
Inter-provincial /
regional corridors
Liberal–
Centralized
National rail &
strategic infrastructure
Coordinated–
Centralized
A national coordinating authority (DoTr) still sets standards, ensures interoperability, and coordinates across all regimes.
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COORDINATION STILL MATTERS
Devolution needs a national anchor
Even in a devolved system, the DoTr retains a critical system-manager role nationally.
DoTr
National Coordinating
Authority
Department of Transportation
1
Sets national policies, standards & guidelines
2
Defines roles and allocation of authority
3
Ensures coherence, interoperability & system integration
4
Monitors and evaluates system performance
5
Coordinates across levels of government and regimes
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Thank you
Questions & discussion
Sunio, V., Gaspay, S., Francisco, K., & Stringer, T.
“Beyond Centralized Franchising: Rethinking Public Transport Governance in the Philippines through Graduated Devolution”