* This is my article in BusinessWorld last April 05, 2019.
The ride-hailing, food- and cargo-delivery, other technology-based service sector is a modern and fast-rising one in the Philippines and in Asia. It helps people and companies conduct their travels and businesses become more convenient and safe. The sector should get further Market-Oriented Reforms for Efficiency (MORE) to aid further modernization and competition, which will benefit the public.
The Philippines has a good outlook in the ride hailing business based on Statista projections. The compounded annual growth rate (CAGR) in 2019-2023 is estimated at 25% and should be among the highest in the world. Indonesia is the biggest market in the region, followed by Singapore and Thailand (see table).
I checked recent reports in BusinessWorld about the sector, I found two:
(1) Ayala Corp. in talks with Go-Jek for PHL venture (March 5, 2019):
“Go-Jek is awaiting regulatory approval to enter the Philippine market after its initial application was denied for breaching foreign ownership restrictions. Ride-hailing apps are considered public transport utilities in the Philippines and must have at least 60% local equity.”
(2) Go-Jek appeal against ride-hailing license ban junked (March 20, 2019):
“The firm applied for a license to operate in Manila in August through wholly owned subsidiary Velox but was denied in January, after ride-hailing was added to a list of industries where foreign ownership is limited to 40%. ‘They filed a motion for reconsideration, but failed to fix Filipino ownership requirement,’ Land Transportation Franchising and Regulatory Board (LTFRB) Chairman Martin Delgra told Reuters.”
So it was the 60-40 constitutional restriction that prevents the entry of Go-Jec in the Philippines. Other big global players like Lyft might consider coming in too someday and they must also endure the 40% maximum foreign equity restrictions.
This is indeed a bad law and constitutional provision that must be corrected and lifted. But while it is still there, we have to live with it. The Philippines’ 30% corporate income tax is a bad and ugly law (vs our neighbors’ 16%-25% rate), the 12% VAT is another bad law, as ours is the highest in East Asia. But we have to live with them until these laws are revised and the tax rates are adjusted downwards and we can join the tax competition in the region. That is how the rule of law works.
We should have more ride-hailing competition in the country, we should attract the big global players as the sector is highly technology- and capital-intensive. These will benefit the public as they will have more choices. But players and the public must respect existing laws then work to amend and liberalize them soon.----------------
BWorld 308, MORE debt reduction please, March 31, 2019
BWorld 309, MORE local government responsibility, April 05, 2019
BWorld 310, MORE stable electricity and competition, April 07, 2019