The essence of the social contract is that the needs of the people are served. That's not happening in Egypt, writes Youssef Bishai*
A key question in understanding the social contract is simple and straightforward: Are people satisfied with the quality of services they receive? Public services form part of the social contract in Egypt and reforming them is becoming ever more important.
One reason for that is the changing role of government as it gives up non-core policy interventions (eg. fertiliser pricing and distribution) to better pursue core welfare services (eg. healthcare and education). A second reason is the dominant capacity constraint government faces. Hospital and road capacity is hardly capable of meeting the growth in population, therefore leaving our public utilities in a state of overuse (or abuse) and poor maintenance.
Faced with the dilemma of expanding its services but with no capacity to do so, the government has had to revamp state-run providers and introduce competition to the marketplace. A case in point is Cairo's public transport.
Drawing a baseline for public transport in Cairo demonstrates a great deal of mismanagement in this sector. To start, the entire transportation grid lacks synchronisation across different modes of transport (ie buses, subway, river, etc). Intercity transport is overseen by too many departments and is lacking a sense of strategy. Asset quality also undermines service provision.
Bus fleets are unequipped for safety and vehicles depreciate at faster-than-expected pace due to rising passenger volumes. Shamefully, you still find see-through floor holes in buses running in Cairo, the earth's 14th largest city. Additionally, some routes are overloaded, the majority are uneconomic, and personnel are severely underpaid.
Furthermore, measurements of quality of service are totally lacking, with no evaluation of such indicators like trip length, bus frequency and user experience. The balance sheets of the Cairo Public Transport Authority (CPTA) summarise this ailing performance: a net loss of LE566 million in 2008/09 (a 2.6 per cent increase in losses from 2007/08). This loss is offset by a government subsidy paid by the taxpayers who thus not only receive awful service but also pay for it twice, "on the road" and through taxes, which raises the question of the true price of the service.
In short, while key passenger requirements are affordability, accessibility and quality, the system pretends to anchor the first, does little to achieve the second, and fails to address the third.
Still, there is a vast opportunity for policy improvement. A new transport policy will not just leverage CPTA finances but also empower the passenger and alleviate his/her trip hurdles. In what sense does this opportunity exist?
Running a market sizing exercise can prove illustrative. Cairo's population hits 20 million in daytime and falls roughly to 16 million in the evening. Assuming that three million people do not regularly use transport and six million others use cars (1.5 million cars), this leaves us with 7-11 million people likely to be using public transit. If the subway, microbuses and taxis can maximally accommodate four million passengers (the subway can carry 1.9 million), the confirmed opportunity for bus transport is crudely over three million passengers per day, which creates a buoyant market.
Over and above, an advantage of bus transit is the absence of network limitations. Bus routes are readily adjustable to urban change if compared to subways whose routes normally require mass population resettlement. This makes expanding the bus grid easy and cost- effective. Commercial services also promise another advantage for bus transit. Indeed, stations and buses should tap opportunities in advertising, food and beverages, and shop rental that are growing to become the major revenue drivers for tour operators worldwide.
Hand in hand with such market opportunity, service providers should focus on disfranchised consumers. As rising fuel prices take their toll on car owners, more people need to shift from cars to public transport. In our simplistic projection of the market's size we did not count users who will switch from microbuses as fuel prices soar and their drivers pass the increase on to passengers. Those price- sensitive passengers, making up the majority of lower-income Egyptians, will increasingly shift to other public transport.
Fulfilling the needs of this rising passenger mass can only take place if greater emphasis is placed on equity. Transfer programmes can deliver equity by creating a multi-segment market with price differentials for adults versus students, peak versus off-peak times, and subsidised versus for-profit routes. Transfer pricing further provides leeway to avoid politically unfavourable tariff meddling. In addition, the consumer will be better off if innovative "supersaver" schemes such as pay-as-you-go travel cards are introduced. Such schemes can be designed to boost ticket sales and CPTA turnover while sustaining affordability to consumers. Existing arrangements like student subscriptions and professional discounts (journalists, police, etc) should be reviewed as they lack business sense and their impact on worse-off segments is quite uncertain.
An accessible public service cannot be provisioned without a strong supply side. The transport market has proven rewarding to both manufacturers and tour operators alike. Evidence from the books of Egypt's leading bus maker, GB Auto, suggests a lucrative gross profitability of 25 per cent in bus manufacturing compared to only 16 per cent in its passenger car business. Not only are manufacturers doing well, but also operators who recently joined the market struck a balance between earnings and user convenience. The introduction of an uptown taxi service and green mini-buses uncovered a large consumer segment that is willing to pay a premium for higher quality. The fundamental lesson for suppliers is to identify the right customer and create the right suite (features, price) to serve it profitably.
However, in contrast to such promising transport economics possibilities, we find policymakers moving on sluggish wheels. In the league of mega cities, where Cairo has positioned itself, transport must be a top priority on the social reform agenda. A few weeks ago a chief advisor to the mayor of London stepped down amid a row about which strategy the city's transport operator should take. This shows, if anything, that transport is a key policy in engaging the public and validating their political choices. Yet in Egypt transport tails the policy agenda and four years of a "technocratic cabinet" have barely touched transport outcomes. Managing CPTA's 2637 vehicles, 340,000 staff, and 3.1 million trips per day is by no means an easy task, but that should not be an excuse for ill performance.
Examining intercity transport shows that such social policies can yield immediate results and produce changes in the way people view and consume public services. This will alter peoples' perception of the state and in turn the social contract binding them together. The present contract is failing. Citizens are fed up with failing utilities, pseudo education, and inhumane healthcare while officials are complaining of overcapacity. Reconciling public services with peoples' expectations takes place by gearing the service to user requirements and commissioning overbooked services to the private market. Doing so will establish a new, performance-based social contract.
* The writer is a Masters degree student in public management at the London School of Economics and fellow at the Mohammed Bin Rashid Al Maktoum Foundation, 2008-09.