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The news about the bus re-operation has brought warm excitement to citizens after they have been bearing years commuting snake-like through this city's daily congestion.

But their hope seems to be fading again when City Hall cancelled the bus contract with Global (Cambodia) Trade Development (Global Taxi), a Cambodian-Chinese taxi operator that has been running over 100 taxis in Phnom Penh since 2006, due to their unsuccessful 'negotiations'. City Hall is now seeking new contractor.

"In principle, we agreed to ask Global Taxi to run the bus service, but they withdrew the plan because attached are some conditions that the municipality can't accept," said Long Dimanche, the City Hall spokesman, "Right now we are seeking a new private firm to operate the bus service."

Dimanche said the government would set up an autonomous public bus operator to manage the bus service that will become a public-private bus management scheme. "We won't let this project go backward, we will only go forward and hope to have the bus service running very soon because we understand the people's difficulty."

While City Hall is scrambling for private firms interested in running the public fleets, hopes in finding a new bus operator have likely narrowed as both Global Taxi and Train-Choice Cambodia (Choice Taxi), the two taxi operators previously selected by the municipality to operate the bus system, all have withdrawn their plans and expressed no more interest in competing for the contract again.

This may reveal how risky and unprofitable the business might be, meaning that the chances of recruiting a new contractor besides these two firms remain less. Choi Dae Yong, President of Trans Choice Cambodia, a South Korean taxi operator, told the Cambodian Business Review briefly on May 16 that his company isn't interested in running the bus service anymore if his request is not met, without mentioning details of what he requested.

The same is confirmed by Lim Andrey, CEO of Global Taxi, who told the Cambodian Business Review on May 18 that he isn't interested in competing for the bus contract anymore, asserting that investing in bus services, especially in a poor infrastructure city like Phnom Penh is risky and faces long-term loss.

"I wasted time over these three years on this project, and I won't compete to win the contract now either because the business is not a gold mine. Now, I have already closed the plan." He said. "But in case the government agrees to offer us incentives, I would rethink it." With six years experience running the taxi business in Phnom Penh and with his global experience, he added that public bus operation anywhere in the world can be done only with incentives offered by the government. "Without incentives or encouragement from City Hall, we won't do it. The bus service will face long-term losses, and investors just don't want to do it because they know it is risky."

Rejecting giving details on what he requested City Hall, the CEO describes that it is something possible that City Hall could help enable his firm to survive providing services over the long term.

He further added that, if Global Taxi and Choice Taxi can't do it, no one else can, even City Hall itself since they don't have technical experience. "Although there were people with experience operating the bus before, they also need to know Phnom Penh geography because it is very difficult management."

The bus history

After the first city bus trial project supported by the Japan International Cooperation Agency (JICA) failed the first time in 2002, just three months after the beginning of operations, a decade later, seven firms contested for the chance to win the capital bus contract.

There wasn't any bidding process to win the bus contract about which many have become confused. Interested firms were encouraged to submit their investment plans, and City Hall selects the best business plan and submits it to the Council of Ministers for approval. Early last year, City Hall selected Global Taxi and Choice Taxi advising them to operate jointly due to their proven experience running meter taxis in the city.

But that failed as Global Taxi rejected the joint cooperation deal and insisted on working alone or letting Choice Taxi manage it alone explaining that the joint venture would only kill both firms. Then City Hall selected Choice Taxi to run the bus system alone. Again, City Hall and Choice Taxi couldn't reach a compromise agreement over the incentive request made by Choice Taxi which resulted in the withdrawal of the contract.

Then in February this year, in cooperation with JICA, the municipality ran a second bus trial for a one month period serving only Monivong Blvd. The service did get massive support from passengers as around 2,000 passengers tried the service daily. After the one month trial ended, City Hall requested Global Taxi to continue the operation for another consecutive month serving the same route. After the one month mission had been completed, Global Taxi quit handing over the service to City Hall again.

"After my requests [of City Hall] were not met, we just tried to finish the [trial] services in the time we promised. Then we completed it. We didn't run away as others have said," he said.

"Just in the one month that we operated the buses on Monivong Blvd alone, we lost around $30,000 already, and, if we continued longer, we would lose much more. I believe the municipality is losing not less than $25,000 monthly now just to serve a single road. But what about serving eight routes and more roads, how much we would lose," he added.

The Global Taxi business plan Having prepared the business plan three years ago without any changes until now, Andrey reveals his almost $12 million investment plan, co-invested with local and foreign investors, showing confidence in success.

The investment is divided into two phases. In the first phase, if it wins the contract, within the first 10 months after signing, it will operate eight routes served by deploying 118 brand new buses with service from 6AM to 8PM every day. The first stage investment would cost over $3 million. He says the municipality can take back the license if he can't achieve that.

In the second phase, within 70 months after the contract signing, the company would add another 10 lines and another additional 214 brand new buses with an over $6.3 million investment. The company would also build bus stops and other facilities within these two phases for a total investment cost of $2.1 million. In the 2nd phase, the company will serve 10 main lines and 8 supporting lines with 332 buses. It will invest more upon actual additional need.

On the bus fare, passengers will be charged 1,300 riels or about US$0.30 per ride regardless how far or near they go. Riders can purchase a monthly ride card worth only $11 that allows them to use the services without limit each month.

It will also offer free services to invalids, children under one meter in height and the elderly over 60 years old with a plan to discount about 3050 percent for students. This is all part of its social contribution and marketing strategy in what Andre explained as a possible conflict with Choice Taxi's business strategy that prevented them from merging their bus services.

The Choice Taxi business plan Choi Dae Yong of Trans-Choice Cambodia last year said that his firm's $5 million business plan, jointly invested in by Japanese, Korean as well as Cambodian investors, can be a success.

The plan is to have 10 bus routes serving the entire capital and nearby suburban areas. One hundred used mid-size buses would be imported from Korea for the project's beginning stages, and services would run from 8 A.M to 9 P.M. daily. After the initial stage, the company would consider using larger or smaller buses or expanding the number of lines.

The fare would be 1,300 riels (US$0.32) per ride. A first transfer on the same day would cost 500 riels (US$0.12) and a second one 700 riels (US$0.20). Students, the elderly children and the disabled would be charged 1,000 riels (US$0.25) per ride. A magnetic card that can be pre-loaded will also be available which passengers could swipe when boarding.

While the future of the Phnom Penh pubic bus service remains uncertain, Masato Koto, team leader of JICA's Phnom Penh Urban Transport Master Plan Project, who is closely involved with the public bus project, is also uncertain whether the new bus service will succeed or fail. But he points out that people in other cities are often unhappy when a new mode of transport is first introduced. "People are basically very conservative including me."

Still, he believes the bus system is one of the most important modes of transport not only to tackle congestion in the short term but also as a rail transit feeder in the future (City Hall has confirmed the launch of the tram service by 2017). "Therefore, the city and our team support the success of this bus operation, and it might take up to three years for the system to catch on with residents after it becomes fully operational."

Koto, however, doesn't think people are going to give up their scooters or other vehicles even if they take the bus. "They'll keep those for weekend trips and for fun."
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Publication:Cambodian Business Review
Geographic Code:9CAMB
Date:Jun 30, 2014

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