21 October 2016
What would be a bigger incentive for taxi drivers to provide better service than being their own boss and owning their own vehicles? Photo: internet
What would be a bigger incentive for taxi drivers to provide better service than being their own boss and owning their own vehicles? Photo: internet

Why the premium taxi pilot scheme is just another hoax

The taxi industry in Hong Kong has become notorious for the deteriorating quality of its service.

Rude drivers, rampant refusals to take passengers, overcharging and relentless fare hikes have resulted in a surge in complaints in recent years.

However, taxi drivers themselves are not entirely to blame, because in fact, the problem largely has its roots in poor regulation and collusion between the government and powerful vested interests in the industry.

As I have mentioned before, since the government ceased issuing permanent taxi licenses back in the early 1990s, the taxi license has become a hotly sought-after commodity, and the speculation in these licenses has become a highly lucrative business.

As a result, the bulk of these licenses have gradually fallen into the hands of a few big owners.

Today, it is estimated that these oligarchs control about 10,000 out of a total of 18,000 taxi licenses.

As the prices of licenses have skyrocketed over the past two decades, these oligarchs have made an enormous fortune by speculating in them.

Unfortunately, the administration has largely turned a blind eye to the rampant speculative activity in the taxi industry over the years and allowed license prices to continue to rise unchecked.

As a result, individual taxi drivers, who rent their vehicles from these oligarchs, and their passengers have turned out to be the biggest losers.

These oligarchs would have continued to enjoy their huge profits if it had not been for the arrival of Uber, a game changer that has toppled the traditional taxi industry in almost every major city across the globe.

Despite the repeated crackdowns by police, Uber has been able to establish itself as a strong competitor in the local taxi market, taking advantage of grey areas in the existing law.

In the face of angry calls among society for straightening out the problem-ridden taxi industry and an outcry from powerful industry oligarchs against Uber, the Leung Chun-ying regime, once again, demonstrated its “ingenuity” by coming up with the idea of a new scheme known as the “Premium Taxis Pilot Scheme”.

Under the proposed scheme, 600 new taxi licenses will be put out to tender, and the successful bidders will be allowed to provide on-call taxi service under a time-limited franchise.

The Transport and Housing Bureau said the service is targeted at high-end customers and will be charging fares up to 30-50 percent higher than the existing taxis.

At first glance, it appears that, with this scheme, the government is determined to straighten out the taxi industry and provide passengers with additional choices.

However, if one looks closer, it is easy to tell that it is just another trick pulled off by the Leung administration to create an impression that it is taking the issue seriously, when in fact it is not.

Instead of rejuvenating the traditional taxi industry and introducing more competition, what the new pilot scheme does is simply create another set of vested interests in the industry at the expense of passengers and individual taxi drivers who are living hand to mouth renting vehicles from the oligarchs.

Just take a look at the facts and see for yourself: under the government proposal, only companies that are large enough to operate a fleet of 100 to 200 vehicles will be allowed to bid for these new licenses, which means the door is completely shut to individual taxi drivers who wish to have their own vehicles and who are experienced and qualified enough to provide a high-end taxi service.

However, even the dumbest people can tell it is just another example of blatant collusion between government and big business and a transfer of benefits at the expense of public interest, because it is almost a foregone conclusion that those 600 new licenses will eventually fall into the hands of either the existing oligarchs or big conglomerates, or both.

As such, the long-standing and unfair situation in which the entire taxi service industry is controlled by a few rich and powerful people, with individual drivers having no say at all, will simply be further reinforced under the proposed scheme.

If the government is really sincere and whole-hearted in putting things right in the taxi industry, then what it should do is issue permanent taxi licenses again and encourage individual taxi drivers to purchase their own licenses.

That way, taxi drivers will be less vulnerable to surging rents.

This article appeared in the Hong Kong Economic Journal on June 24.

Translation by Alan Lee

[Chinese version 中文版]

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Former radio talk show host; Columnist at the Hong Kong Economic Journal

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