The disruptive nature of ride-hailing has made it an easy target for government regulators. The authorities find themselves struggling to balance consumer demand, customer protection, taxi-driver concerns, and whether to categorise ride-hailing drivers as independent contractors or employees.
Some parts of Asia are handling this challenge better than others. According to the report e-Conomy SEA 2019 by Google, Temasek and Bain & Co., the number of people in Southeast Asia using ride-hailing services in the region has surged to 40 million — five times more than in 2015.
In Southeast Asia, Singapore-based Grab and Jakarta-based Gojek reign supreme.
Grab acquired Uber’s Southeast Asia’s operations in March of last year, allowing it to take the lion’s share of the ride-hailing market in the region, according to research by Frost & Sullivan. Gojek, the Indonesian startup, initially focused on a specific niche. The company first served users who want two-wheeled transport, which is faster in the snarled traffic jams that are so common in Southeast Asia’s capital cities.
In parts of North Asia it’s a different story.
In Hong Kong, proponents of ride-hailing services have long criticised the government for protecting the “taxi mafia” and blocking ride-hailing companies from operating. Uber technically hasn’t exited the country but it’s not exactly legal either. This limited competition has left Hong Kongers to travel in some of the shabbiest taxis in the world. The system of red, green and blue taxis is also hard to decode, and means you can’t always take one class of taxi to your destination in another zone.
Meanwhile, in Taiwan, Japan, and Korea, the huge number of taxi-driver voters has made governments wary of allowing a new entrant into the transport sector. Uber’s foothold in Taiwan is once again at risk after regulations in June this year overturned provisions that allowed Uber to partner with rental-car companies.
Despite this, consumer demand for ride-hailing remains strong in these markets. Perhaps they should follow the examples set in Southeast Asia, where ride-hailing companies thrive thanks to a largely progressive stance by governments in the region.
A model for regulating ride-hailing?
In Singapore, the government responded to the emergence of ride-hailing companies by allowing users to book private cars-for-hire through a mobile app. The knee-jerk reaction would be to ban these companies outright; instead, the government adopted a “wait and see” approach to see if this disruption would lead to anything good.
The same thing happened in Malaysia, where Grab was in fact founded in a garage in Kuala Lumpur, before moving its headquarters to Singapore. A few errant drivers had given the taxi industry a bad name, creating an opportunity for the ride-hailing startup to offer a better product.
As the industry matured, the governments in these countries saw the need to enact more permanent regulations. They mandated training and licensing for private-hire drivers, and stickers on registered ride-hailing cars for safety and law enforcement purposes.
These regulations, however, ultimately seek to protect the riding public and the drivers operating these private-hire vehicles. The companies themselves are still allowed to operate provided that they play by the rules.
Competition lowers fares and increases earnings
A study by the National University of Singapore’s business school reveals that in Singapore, healthy competition between ride-hailing companies has helped lower commuter fares and increase driver earnings.
The study, commissioned by Gojek, found that average daily ride-hailing fares fell by 11% after new players entered the market and Grab acquired Uber, while 55% of drivers said their earnings had increased.
Fewer restrictions lead to innovations
While Uber may have exited some parts of Asia, it left behind a legacy. It has given birth to companies that don’t just offer similar services, but have applied the hailing business in new ways, introducing an “Uber for everything” — for food, for parcels, and for groceries.
Startups like FoodPanda, Lalamove, Kargo, and Meituan Waimai, which operate in countries such as China, India, Indonesia, Malaysia, the Philippines and Thailand, are offering on-demand food delivery and logistics. The rise of these companies, in turn, has created thousands of flexible jobs, allowing people to work as drivers and bike riders on a full-time or part-time basis. For restaurants and small businesses, these services allow them to expand their customer base. They can also provide delivery services they otherwise could not do on their own.
It’s clear that providing the space for these companies to flourish has also led to innovations that improve people’s lives. This is a rapidly-evolving industry. Allowing companies to experiment with new digital business models with as little restriction as possible has benefitted the general public. This approach also allows regulators to observe and learn from the industry. This way, when the need for regulation does arise, any proposed rules come from an informed place.
Of course, all of this is easier said than done.
For one thing, the task of helping ride-hailing services coexist with taxi companies continues to be a problem in some parts of Asia. The government can act as a mediator by showing how the two sides can benefit from one another. We’re already seeing this happen in places such as Singapore, with taxi drivers using ride-hailing apps to significantly increase their earnings.
At the same time, ride-hailing companies can also collaborate with governments to help them understand the benefits and future opportunities of their services — from city planning, integration into public-transport networks, and digital safety.
Asian consumers are clearly smitten with ride-hailing, and the industry is growing fast, with no signs of slowing down anytime soon. For governments that can successfully balance disruption, serve the public good, and enhance existing transport options, the rewards of innovation and community transformation are well worth the challenge.