* 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.
----------------
See also:
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
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