COMPARISON OF AFFORDABILITY INDICES AND URBAN BUS SUBSIDIES IN MEDIUM-SIZED CITY—CASE STUDY: JOGJAKARTA AND PALEMBANG—

Abstract

Subsidy policies on urban public transport have been adopted ubiquitously in both developed and developing countries. Generally, subsidies are implemented to make transport more affordable. To measure and to understand the transport expenditure of households are critically important for evaluating transport policies, as well as for investigating their effectiveness. This research describes the role of urban public transport and incidence of bus subsidies in medium-sized cities such as Jogjakarta and Palembang, Indo- nesia, where new transit systems were launched to replace the existing bus services being abandoned by city dwellers. The results indicate that while the poorest households constitute one-fourth of total households in the sample of Jogjakarta and Palembang, they receive only 5 and 6 percent of transit subsidies, respectively. The wealthiest households, who constitute 8 and 7 percent in the sample of Jogjakarta and Palembang, receive transit subsidy that are more than three time and more than two times larger than their equal share, respectively, under the uniform distribution of the subsidy across income groups. The middle income group, earning Rp 1,000,000-Rp 2,500,000 per month receives subsidy benefits in roughly equal proportion to their share in the population of both cities. The high income group, earning Rp 2,500,000-Rp 5,000,000 per month receives about one-third subsidy benefits in both cities, respectively. Average affordability indices and bottom quintile affordability indices of Jogjakarta and Palembang is 17% and 20%, and 25% and 27%, respectively, indicating the expenditure on public transport is too expensive.