E-hailing — the part-time industry

by SOO SIN YUN / TMR file pix

E-Hailing has transformed transportation in Malaysia, particularly in our big towns and cities.

When only a few years ago, it was a novelty, now ordering a ride on our mobile phones has become the norm.

According to Transport Minister Anthony Loke, the number of trips recorded by e-hailing companies has increased from six million a month in 2016 to 18 million trips this year.

This growth has been hugely beneficial to consumers looking for convenient and affordable options for getting around. As e-hailing has become increasingly popular, it has also become an important source of employment.

Many new drivers have taken the advantage of the e-hailing revolution and many of those are attracted to one of the industries defining features: Its flexibility. These drivers are working part-time, on the hours that work for them to earn some extra cash, perhaps as a top-up to a full-time job.

Loke claims that 75% of a total of 200,000 e-hailing drivers in Malaysia are part-time drivers.

Low costs and few barriers to entry have encouraged new drivers to sign up. However, conventional taxi drivers, which are heavily regulated compared to e-hailing drivers, groused that costs arising from regulation compliance have undermined their competitiveness.

In a move intended to level the playing field between taxi drivers and e-hailing drivers, the Ministry of Transport enforced the Land Public Transport (Amendment) Act 2017 and the Commercial Vehicle Licencing Board (Amendment) Act 2017 in July 2017.

E-hailing drivers will now be subjected to the same regulatory standards as taxi drivers, especially for licence registration and vehicle checks.

They are required to undergo a RM200 six-hour training course at designated driving institutions to apply for a Public Service Vehicle (PSV) licence, which has an annual renewal fee of RM115.

Vehicles over three years will need to go through annual vehicle inspection at the Computerised Vehicle Inspection Centre (Puspakom), which costs RM55.

The claim that these regulations level the playing field can itself be challenged — traditional taxi drivers enjoy certain benefits, such as toll exemptions that e-hailing drivers do not.

E-hailing drivers also undergo ongoing data-driven checks and monitoring, for example monitoring speed and driving patterns via telematics, in many ways much more stringent than traditional metered taxis, which are usually monitored via complaints.

That aside, one of the main issues that arise from these new regulations is the impact on part-time drivers.

Although a one-year grace period is given to e-hailing drivers and companies to comply to these conditions, the industry is already feeling the effects of the new stipulations.

Grab, which is a dominant e-hailing company in Malaysia, experienced a decline in part-time driver sign-ups, according to its country head Sean Goh.

Unlike full-time drivers who enjoy a steady stream of income, part-time drivers — many whom are students or full-time employees struggling to make ends meet — may not be able to cope with the higher fixed costs.

Part-timers are also reluctant to go through the hassle of applying for a licence or queueing for vehicle checks just to earn a small amount of money.

Since part-timers feel the pinch from the new regulations the most, the e-hailing industry — with an overwhelming 75% part-time drivers in the workforce — is at risk.

It is very likely that the new regulations will reduce the supply of drivers. E-hailing companies may even resort to raising fares to attract more drivers. Ultimately, consumers will have to contend with an increase in transportation fares.

A similar situation has unfolded in the home-sharing industry in Japan, in which laws passed in June require operators to go through complex registration processes and restrict home-sharing to 180 days per year.

The industry took a hit, with only 5,397 registered properties in early July, a far cry from the 60,000 properties originally listed on intermediary websites like Airbnb.

As demand for private home-sharing remains strong, the decrease in supply has caused a price increase of as high as 50% in one case in Tokyo, according to Kurumi Ishii, a certified legal specialist who has written a book on private lodgings.

The new laws were intended to spur the home-sharing industry by giving them legal recognition, but may have the opposite effect of deterring private home-owners from entering the market.

This calls into question the wisdom of over-regulating the sharing economy.

This does not mean that the e-hailing industry should not be regulated at all. Criminal checks, insurance coverage, vehicle inspections and licensing requirement are all fair regulations which can ensure passenger and driver safety, and develop confidence in the industry.

However, it is crucial that the implementation of these regulations imposes the least possible burden on drivers and recognises the dynamics of the e-hailing industry, in particular the reliance on part-time workers.

To take one example: Currently, vehicle checks requirement can only be fulfilled at Puspakom. It may be worth allowing vehicle inspections to be conducted at certified auto mechanic shops, with Puspakom acting as the regulator.

This may ease the regulatory burden on drivers in the form of convenience, efficiency and decreased prices as a result of competition.

For example, in California, e-hailing drivers have the choice of getting their cars inspected at a range of shops, as long as they are licensed by the California Bureau of Automotive Repairs.

The licensing process could also be streamlined further. As an example, it is not mandatory for e-hailing drivers in Toronto to undergo a training course even though they are required to have a Private Transportation Company (PTC) licence. E-hailing companies are also authorised to apply for the PTC licence on behalf of their drivers, after potential drivers have submitted the necessary documents such as proofs for background checks.

It is important to note that these regulatory relaxations should not be exclusive to e-hailing companies — taxi drivers can also stand to gain from liberalisation of the industry.

The e-hailing industry is at the forefront of the sharing economy, which is an important driver of growth around the world.

In Malaysia, the e-hailing industry has empowered working persons, students and even housewives to have an extra source of income and serves as a valuable alternative to consumers.

The importance of the e-hailing industry cannot be denied, and therefore, its growth should not be curtailed.

At the same time, how do we ensure that it is safe and does not have an unfair advantage over the traditional taxi industry?

The answer is simple: Let us not shackle e-hailing companies with more stringent rules. Instead, reduce the regulatory burden on taxi companies, while making sure that any safety regulations implemented in both industries allow innovation and competition to thrive.

Soo Sin Yun is a research intern at the Institute for Democracy and Economic Affairs. The views expressed are of the writer and do not necessarily reflect the owners of the newspaper and the editorial board.