Public Bus Transport Reform and Service Contract in Arao

AbstractConfronting with declined passengers and increased subsidy, Arao city government has taken a plan for reforming public bus transport since 2005. The monopoly operating right of public bus transport service was transferred to one private company. This paper summarizes the valuable experience of public transport reforms by analyzing the subsidy and efficiency before and after the reform in Arao. The reform has proven be influential on reducing subsidy. However, it is hard to balance the service level and cost thus subsidy. By summarizing the characteristic of the reform, results show that introduction of competitive tendering is necessary in a long time in the reform afterward. Moreover, an appropriate contract and regulatory rules that contract parties both operator and authority in the provision of the services are important as well