* This is my column in BusinessWorld last July 02, 2018.
“For every action, there is an equal opposite reaction.”
— Isaac Newton (1642 — 1726) 3rd law of motion.
“Every government intervention creates unintended
consequences which leads to further intervention.”
— Ludwig von Mises (1881-1973, Austrian economist)
My addition to the two related statements above is: For
every government intervention and taxation, there is an equal opposite
distortion.
And this is what exactly happens with a series of
franchise, price, and surge control and then the per-minute charge control
policies of the Land Transportation Franchising and Regulatory Board (LTFRB) in
its regulation of transport network vehicle services (TNVSs) and transport
network companies (TNCs).
First, franchise control.
When Uber exited Southeast Asia last April and was
acquired by Grab, it had 19,000 Uber drivers in the Philippines. However, only
11,000 were absorbed by Grab because LTFRB only accredited this number. Until
June this year, some 6,000 former Uber drivers were still waiting accreditation
but LTFRB franchise control does not give them the chance. Some 2,000 ex-Uber
drivers must have given up.
Fare control makes it difficult to get a ride
As a result, after the acquisition, ride requests reached
600,000 per day on average, making it difficult for everyone — even previous
Uber users — to get a ride.
Second, price and surge control.
Even when Uber was operational, LTFRB put a cap on surge
pricing on both Uber and Grab to 2x, later down to 1.5x, and this resulted in
passenger inconvenience as their waiting time to get a car during rush hours
became longer.
When the price is too low, the number of drivers to
supply the demand is also low. A notice of “no cars available” shows up and
riders’ waiting time to get a ride gets longer, if ever the car shows up. Which
might mean cancellations of important meetings or inability to bring a sick
person to the hospital.
When the price is too high, the number of riders will
decline, or they will take the regular taxi or cheaper but lesser-known (good
or bad) companies. If the trip is not very important, they may choose to
postpone their trip and wait until prices decline.
Third, per-minute charge control.
TNVS charging P2 per minute is a mechanism to offset the
big decline in surge pricing to only 1.5x. So even if the route and the pickup
and drop-off areas have heavy traffic or are flooded, drivers will have
additional incentive to take that trip. Abolition of per-minute charging
therefore removes the incentive and hence, passengers will be unable to get a
ride.
These three ugly interventions and regulations by LTFRB
are anti-commuter and directly contradict its stated mission, “Ensure that the
commuting public has adequate, safe, convenient, environment-friendly and
dependable public land transportation services at reasonable rates.” Cheap but
not available service is not desirable.
Now there is a fourth ugly intervention by the LTFRB. It
disallows Grab the P2/minute charge but allows new players to charge that
amount.
This new policy of LTFRB violates the rule of law, that a
law should apply to all players with no exception. What the agency exhibited
therefore is favoritism of new players while harassment of existing player. In
which case, LTFRB can also be called as the “Land Transport Favoritism and
Regulations Bureaucracy.”
Only about 2.7% of the commuting public use ride-hailing
services, the rest use mass transportation (jeepney, bus, UV express, MRT, LRT)
plus tricycle, trisikad, and regular taxi. Why is the LTFRB focusing on that
segment?
LTFRB should be ashamed of its franchise control, surge
control, per-minute charge control, and TNC favoritism. It should reverse these
policies. It should (a) expand the number of TNC drivers, (b) allow higher
surge pricing, and (c) allow the P2/minute for all players, and not play
favorites.
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See also:
BWorld 225, Anti-reason of Duterte’s anti-tambay order, July 11, 2018
BWorld 226, The EPIRA is working, July 12, 2018
BWorld 227, Inflation, taxation, and protectionism, July 14, 2018
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