Regulate Uber? Why? What for?

By February 16, 2017Current

TL;DR – Level up, not down.

We’ve long heard Singaporean taxi drivers clamouring for the government to “level the playing field”. They feel that private hire cars, aka Uber and Grab, have negatively affected their incomes. There are also concerns about the safety of private hire cars. These are the ostensible reasons why the government has passed laws to regulate private hire cars.

This came on top of the announcement by Land Transport Authority (LTA) last year that regulations for private hire car drivers and vehicles would take effect in the first half of this year. These regulations include

  • Requiring drivers who wish to provide chauffeured services to apply for and obtain a Private Hire Car Driver’s Vocational Licence (PDVL)
  • For all private hire cars to be registered with LTA
  • Requiring drivers display their PDVLs a tamper-evident decal prominently

We agree that it is definitely important to put in measures to minimise the risk to passengers of private hire cars. But should the measures come from the government?

Ideally, the government should only step in if there is some form of market failure. If the market can provide the incentives for the private hire car drivers and companies to minimise the risk to passengers and disincentives if they don’t, then the government should, as far as possible, leave it to market.

Has the market failed?

In the case of private hire cars and their drivers, has the market worked? Let’s look at the evidence.

According to a survey by the Public Transport Council (PTC) of about 1,500 respondents, 97.3% of respondents were satisfied with the service of private hire car services. Respondents rated private car services 7.9 out of 10. The satisfaction levels for private hire car services are higher than those of taxis. 94.4% of respondents are satisfied with the service of taxis. Respondents rated taxi services 7.5 out of 10.

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In other words, even without any regulations, private hire cars provide better service than taxis, which are heavily regulated. While the survey didn’t explicitly measure safety, the perception of service standards most certainly would have taken into whether the service is safe. And indeed, respondents were surveyed on eight key attributes of taxi services: Waiting time, ease of booking, information, ride comfort, driver’s knowledge of route, service provided by the driver, safety and taxi stand accessibility.

So. Is there a need for the government to step in to regulate?

Perhaps if the government is really paranoid, which it is.  It may be concerned that there aren’t enough incentives and disincentives for the market to continue regulating itself. And that’s why it has taken the step of increasing the disincentives for private car operators (e.g. Uber and Grab) should they fail to maintain the safety and service standards.

Amongst the regulations, if private-hire car services, service operators with three or more instances of their drivers committing major offences within the preceding 12 months, then drivers will be barred from driving for them. With such a “significant regulatory threat”, private hire care service operators should be more than well motivated to provide good quality and safe service. Perhaps that is as a light a touch as the government, paranoid as it is, can get.

What about incomes of taxi drivers?

But what of the poor taxi drivers? The assumption that private hire car services have had a significant negative impact on the income of taxi drivers may not bear out in fact. According to the PTC:

“As taxi ridership has only fallen marginally over the past few years, this implies that the majority of the private hire car trips are likely to be catering to new or unmet demand”

If taxi ridership has only fallen marginally, then any drop in the incomes of taxi drivers would likely not be due to the impact of private hire cars unless there is a sudden surge in number of taxis. However, that is unlikely. According to the Land Transport Authority (LTA), the number of applications for taxi-driver vocational licences fell from 9,094 in 2013 to 7,968 in 2015. So if the income of taxi drivers fall, it cannot be due to private hire cars.

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In other words, the way to “level the playing field” is not to encumber private hire car drivers and operators with complicated regulations. That would be levelling the playing field down. Instead, we should level the playing field up. Simplify the regulations on taxi drivers. Put in measures to encourage taxi operators to evolve with the times, and help their taxi drivers to adapt.

And then let the market regulate itself. And we are already seeing that happen. Singapore’s second-largest taxi company Trans-cab on Wednesday (Dec 28) announced rental rate cuts for taxi drivers of up to 33%. Such a significant reduction in rental rate would translate to an increase in earnings for taxi drivers. Following Trans-cab’s footsteps, Premier has also reduced rentals and offered incentives to drivers who complete a six-month contract.

What about ComfortDelGro Corp, Singapore’s largest taxi operator with its 16,821 taxis or 61 per cent of the taxi market here? It is reportedly looking to revamp cab fares to make them simpler and flatter to win back customers lost to fast-growing private-hire fleets.

Labour MP and advisor to the National Taxi Association, Ang Hin Kee, has been advocating about levelling the playing field since a long time ago, and he also believes techonology should be leveraged upon to make the most of the situation, without compromising passengers’ safety.

Ang recently said that taxi fares and rentals have always been in the hands of the taxi operators, the taxi drivers price-takers. If the taxi operators can simplify the fares and rentals, it can definitely benefit both passengers and taxi drivers.

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So it seems that rather than hurting the incomes of taxi drivers, private hire car services are what we need to finally get taxi companies to give taxi drivers a better deal. As such, if the government really wants to help taxi drivers, then it should really continue to allow private car hire services to flourish here.

Keep the touch light

Therefore, if the government really can’t help itself and still wants to regulate, then it should restrict to as light a touch as possible. Something that Second Minister for Transport Ng Chee Meng agrees with. He said this in Parliament:

“We are therefore adopting a balanced, light-touch regulatory stance that protects the safety of passengers and other road users, and yet ensures that these technologies can flourish”

Let’s hope the government continues with this stance.


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Author CRC

Working on a startup is a scary crazy process. To destress, I write random stuff.

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