Time to divest JUTC
THE REVELATION that Contractor General Dirk Harrison is investigating the award of a security, and perhaps other, contracts, at the Jamaica Urban Transit Company (JUTC) is just the latest in a series of controversies at that firm, which reinforces our view of the urgent need for a frank conversation about its future, including of its ownership and management.
The JUTC is the state bus company. It was established in the late 1990s to bring order to what, in the decade and a half after the closure of its predecessor, the Jamaica Omnibus Service (JOS), had become a shambolic public transport system in the Greater Kingston area. For a while, the JUTC seemed to be achieving its mandate. Discipline largely returned to the city’s bus routes. The JUTC’s modern, decently appointed buses mostly adhered to schedules and didn’t race along the roads.
The company, however, failed to make money. Rather, it lost it by the buckets. In the current fiscal year, the JUTC projects to lose J$7.3 billion, before a direct government subsidy of J$2.5 billion. Its deficit will reach J$30 billion. Even those figures mask the real situation, given that there are some costs, including for capital stock, that are not for its account. If the JUTC were a private company, without the cushion of taxpayers, the receivers would have long been in.
There are several reasons for this state of affairs at the JUTC. A major one is that the 58 million passengers who will ride JUTC buses this year won’t pay the economic cost of their trips. They receive government subsidies, especially students and pensioners. But subsidies to public transportation are not unique to Jamaica. It is a matter of policy in many countries, given how crucial the system is to an efficient economy.
The JUTC confronts another issue: competition on its routes, much of it from illegal route taxis. Then there is the perennial burden of state companies: their use as vehicles through which governments dispense largesse. They are also often badly managed.
A fortnight ago, the current JUTC CEO, Paul Abrahams, reappointed to the job at the change of government a year and a half ago, complained of the company being overstaffed by nearly 500. Staff numbers had risen after he demitted office in 2012. The implication was that the former administration had engaged in political hiring. There would have to be job cuts.
The Opposition hit back: Staff increased because they ran more buses. Now, bad management meant that the JUTC had a smaller operational fleet.
The initial contretemps were followed last week with a call by the Opposition for the resignation of the JUTC board over allegations that the company had hired a security company, to which a board member is connected, in breach of procurement rules. Worse, the security firm was to do work that should be done internally. Mr Abrahams rejected those claims, but conceded that the firm had been hired on a short-term contract. Another arrangement was abandoned when it was discovered that a competitive tender was required – an action aimed, the Opposition said, at a clean-up once they were caught out.
We don’t know where the truth lies in these charges and counterclaims. But perennially, controversy can’t be good for the morale of workers and for the atmosphere within which managers operate. We previously called for a thoughtful conversation on the future of the JUTC, and public transportation more generally. That needs to be accelerated.
The Government must determine whether it should be in the bus business, or if it should be merely its regulator. If it leaves the business, it has to decide if it provides the sector with subsidies, and the process by which this is done. In the meantime, the administration should employ an external firm with expertise in public transport to manage the JUTC.