* This is my column in BusinessWorld last April 23, 2018.
“The consumers
force all those engaged in production to comply with their orders…. It makes
competition work. He who best serves the consumers profits most and accumulates
riches.”
— Ludwig von Mises,
Economic Freedom and Interventionism (1990).
Market competition is good. It gives consumers more
options and forces competing players to adjust to their varying demands and
wishes.
However, several government regulations — such as price
and fare controls — go against this principle because it discourages companies
from introducing innovation.
When Uber pulled out of Southeast Asia and decided to
merge with Grab, it was simply exercising its prerogative. After all, the
company, or any company for that matter, can freely enter or leave a market on
its own.
Uber has helped popularize technology-based ride-hailing
in the region and has inspired Grab and emerging players to do the same, and
even improve on the technology aspects of the business.
What should worry the public, especially the commuters,
is when government — via the LTFRB, DoTr — decides to bureaucratize the
emergence of new players by imposing new regulations like fare control via cap
or ceiling on price surge, among a host of other requirements.
Grab as the surviving big entity cannot and should not be
considered as “monopoly.” After all, regular cabs, airport taxis, and hotel
cars remain available.
If commuters really want cheap rides, they are free to
ride buses, jeepneys, and UV expresses.
The price surge in exchange for availability of cars when
they are most needed is a trade-off that many Filipinos and Southeast Asians
can accept.
Here are four reasons why.
First, people in the region have rising income and
therefore, more people have the ability to pay for more expensive trips in
exchange for convenience, comfort, and safety.
These numbers show two things: (1) car sales are high and
are rising further (except in the Philippines which implemented increased
excise taxes on cars due to TRAIN), and (2) per capita income is either high
(Singapore, Malaysia, Thailand) or at medium level but the expansion is high,
30-38% in just five years (Indonesia, Philippines, Vietnam).
Two, the price surge is an incentive for drivers to go to
“inhospitable” areas. A person living in a very congested neighborhood but has
to bring a family member to hospital emergency may not bother paying a price
surge 10x or 20x because it is a matter of life or death for the loved one. And
it is possible that the driver may not even charge at all if he/she sees the
condition of the patient and have pity.
Three, the contracting system by taxis is a form of a
price surge, an incentive for the taxi driver to pick up passengers despite
heavy traffic, or flood, or late hours of the night or wee hours of the
morning.
Many passengers would agree to pay for increased fares so
long as they reach their destination safely. The LTFRB cannot track price
surges by taxis but can check price surges by tech companies and this is where
agency harassment is most pronounced.
Four, an expensive dominant player is good news to new and
upcoming players. They might have a big volume of instant customers if they can
initiate and offer lower prices for the same level of convenience and safety.
In a similar case, a friend who runs a UV Express made
this observation.
We at the UV Express side are experiencing purging.
Transportation is a very good source of livelihood but up to now government
does not open any franchises for the transport sector. “Colorum” vans and
operators are treated like criminals with a shoot order. All these operators
and driver want is a decent job. Government does not have an alternative
solution to incorporate returning OFWs who use their hard-earned money to buy
cars or vans hoping that government will open new franchises to do business in
the country. Government treats would-be small businessmen as criminals since it
prevents the people the opportunity to be legal.
A government-imposed price and fare control is wrong. Its
move to restrict franchises is wrong. Government should encourage more players
and competitors per sector or industry, not less. Regulations like fare control
and franchise control can discourage more innovative entrants. The government
should give commuters more options as to which players to use and support.
---------------
See also:
BWorld 204, Mining attractiveness index and the Philippines, April 30, 2018
BWorld 204, Mining attractiveness index and the Philippines, April 30, 2018
BWorld 205, Energy mix and wishful thinking, April 30, 2018
BWorld 206, Intellectual property rights in East Asia, May 09, 2018
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