BWorld 215, Urban mobility index and transport disruption

* This is my column in BusinessWorld last week, May 24.

As incomes rise around the world, they tend to stay within cities, urban hubs, and rural areas on the cusp of urbanization. Congestion follows as a result, even if property developments are done vertically.

After searching for an international transportation or mobility index that includes Metro Manila or the Philippines, I found one made by the Arthur Little Consultancy. They developed the Urban Mobility Index, a point system with 100 points as the perfect score.

The index is composed of three groups of urban mobility systems: Maturity of the system (36 points), Innovation (24 points), and Performance (40 points), with nine topics in each group. These are: Transport-related CO2 emissions, NO2 concentration, PM10 concentration, PM2.5 concentration, Traffic-related fatalities, Increase share of public transpo (PT) in modal split, Increase share zero-emission modes, Mean travel time to work, and Motorization level.

The second biggest group, Maturity, and its nine topics are: Financial attractiveness of PT, Share of PT in modal split, Share of zero-emission modes, Road density, Cycle-path network density, Urban agglomeration density, Public-transport frequency, Urban mobility initiatives, and Urban logistics initiatives.

About 100 cities worldwide are covered. Surprisingly, Metro Manila has scored moderately and not in the lowest group of cities (see Table 1).

People may wonder why Metro Manila has ranked higher than Osaka or Sydney or Kuala Lumpur. Perhaps the surveyors and researchers covered only the EDSA area where a train — however cramped — exists and jeepneys and tricycles are banned. Vehicles move along at slow speeds during rush hours.

Disruption in urban mobility was first made by MRT/LRT a few decades ago. However, an increase in capacity was few and far in between, resulting in a persistent “transport crisis.”

The second round of disruption was made by vans and UV expresses, which help ferry passengers from high density locations and help them avoid taking multiple rides to their destinations.

However, this local initiative was restricted by the government via the LTFRB as it severely limited the franchising of UV express vehicles and heavily penalized vans that were “colorum (unregistered).”

A third round of disruption was introduced by a multinational company, US-based Uber. It was so successful, it inspired a regional competitor, Singapore-based Grab, to offer the same service.

Unfortunately, the LTFRB kept to its antiquated regulations, restricting the number of cars to serve both Uber and Grab. It later penalized Uber with a substantial fine.

Plagued with its own financial issues, Uber later decided to quit Southeast Asia and merge with Grab.

Meanwhile, actions of the LTFRB leave much to be desired.

Of the 19,000 Uber drivers, only 11,000 were absorbed by Grab since these were the only ones accredited by the LTFRB.

Some 6,000 former Uber drivers are still waiting accreditation and are unable to drive for Grab because they are not in the LTFRB master list while some 2,000 ex-Uber drivers have possibly given up (see Table 2).

Grab Philippines Country manager Brian Cu brought this up during his presentation during the BusinessWorld Economic Forum 2018 on May 18 at Grand Hyatt Hotel, BGC in Taguig City. The forum’s theme was “Disruptor or Disrupted: The Philippines at the Crossroads.”

Ride-sharing and TNVS scheme are disruptors in urban mobility system and thousands of commuters have benefited. The LTFRB and government bureaucracy have disrupted this in their own way, resulting in increased inconvenience for TNVS passengers.

To this day, the LTFRB continues to control fares and cap surge pricing, a move that discourages drivers from getting incentives for picking up passengers even in inhospitable areas. This, despite the fact that the agency has already limited the number of accredited drivers, as discussed previously.

Providing comfortable, convenient, and safe transportation is not a crime and government has no business limiting this kind of entrepreneurship. Government should instead further expand competition, stay away from price and fare control, and allow commuters to have more choices.

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See also:

BWorld 207, Fare control and surge cap are wrong, May 10, 2018

BWorld 213, Disruption, inflation and taxation, May 23, 2018 

BWorld 214, Disruption in global economic power, May 24, 2018 

BWorld podcast 2, TNVS fare and surge control are wrong, May 26, 2018

BWorld podcast 2, TNVS fare and surge control are wrong

My second podcast in BusinessWorld was posted last May 17, 2018.

I discussed there what I frequently argue in my column -- that government interventions in pricing in a deregulated sector is wrong, that price and fare control is wrong. Government restrictions in number of land transportation franchises and transport network vehicle service (TNVS) like Uber, Grab, new players like Hirna, are wrong.

Government should encourage more players and competitors per sector, per industry. Consumers and commuters must have more choices in ride sharing.

See also: BWorld 156, Integrated PPP vs hybrid PPP, October 04, 2017.

BWorld 207, Fare control and surge cap are wrong

* 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.

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See also:
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

Transport Econ 22, Uber's merger with Grab

On Uber merger with  Grab in SE Asia (not just PH). It is business prerogative to enter a market and make money, it is also business prerogative to exit a market and pull out its money. Should be no big deal for us.

I think it is Uber HQ's decision in the US to pull out partially or fully (someday) from SE Asia. Why, perhaps they just want to get their money and put it elsewhere, maybe strengthen their US and Europe presence. It's their capital.

What should worry us is if government -- via the LTFRB, DOTR -- will bureaucratize a new PH tech company/ies that will rival Grab. Uber is US-based, Grab is SG-based. Perhaps it is time for a PH-based tech company to venture in this business.

My advice to friends who use the "Duterte/LTFRB harassment of Uber then merger with Grab", maybe Yes but very likely No, so don't pursue it. I think this is a purely business decision by Uber HQ. The good thing is that Uber has inspired many local businesses here to copy their model, improve on it then dream big.

Capitalism always encourages innovation. The bigger innovation would be how to baffle the LTFRB bureaucrats here so that a tech company won't be harassed and treated as a regular taxi company.

Uber HQ by now may have realized that they did not factor in well how different the Asian transportation bureaucratics are compared to the US and Europe transpo bureaucrats. They may have to tweak their system then come back later.

Regular taxis are still the main competitor of Grab-Uber, so there is no monopoly. Taxis can also provide good service like cleaner cars and seats, more courteous drivers. But more than convenience, the main advantage of tech companies is transparency and hence, better safety. The passenger already knows the name and plate no. of the car that will pick him/her up, the same for the driver, he/she knows the name of passenger even before they meet. In contrast, taxis are known beforehand to LTFRB regulator-bureaucrats but not to the would-be passengers.

Reposting two items here.

(1) From my friend Vic M:
"It was a failure in the open market by the drivers, the investors in cars, the investors in the business. I'm for a safety net but not for bailouts.

The market mechanism is for reposession of the collateral. If an investor in cars for use in an Uber business model signed a cross-collateralization agreement, deficiency remediation provision, or worst, personal guarantee, then it was their stupidity to have signed those legal remedies. Why should anyone bail them out? Under the reposession case, the price of used cars will come down which may lead to lower brand new car prices as well. The consumer wins.

(2) 3 ride-sharing firms apply for LTFRB accreditation

March 29, 2018 | 12:04 am

By Patrizia Paola C. Marcelo, Reporter

http://bworldonline.com/3-ride-sharing-firms-apply-for-ltfrb-accreditation/

THE LAND Transportation Franchising and Regulatory Board (LTFRB) is currently processing the applications of three transport network companies (TNCs), which are expected challenge the dominance of Grab Philippines…. Lag Go, Owto, and Hype.

If granted franchises, the vehicles of the accredited TNCs will be part of the common supply base of 65,000 transport network vehicle service (TNVS) in Metro Manila.

Indonesian ride-hailing and online payment company Go-Jek earlier said the company aimed to set up operations in the Philippines this year.

“With the increase of supply base under one app, you should see allocation times get better because the density of cars across the map gets better. So it’s easier to allocate. So if it’s easier to allocate, the surge would not be as frequent as before,” Grab Philippines country head Brian P. Cu said said in a press conference.

Mr. Cu said they expect around 20,000-24,000 drivers from the Uber system, based from the master list of the LTFRB. The total merged number is estimated at 55,000-65,000 if all drivers from the Uber system transfers to Grab.
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See also:

Transport Econ 19, On taxi fare contracting, December 17, 2016 

Transport Econ 20, On traffic and road sharing, January 20, 2017 

Transport Econ 21, E-trikes halted, P455k each, June 08, 2017

BWorld 124, On Grab, Uber, traffic and LTFRB

* This is my article in BusinessWorld on April 11, 2017.

The sharing economy is among the wonderful new inventions as humanity innovates with more modern technology. Technology companies (not transport firms or hotels) now allow private motorists to transport passengers and private homeowners can take guests and visitors for a fee via Airbnb.

There are two major advantages of tech companies in land transportation like Uber, Grab, and Lyft. First, transparency between the driver and passenger/s.

Since both drivers and passengers have accounts with these tech companies officially called transportation network vehicle services (TNVS), they can identify each other -- using car model and plate number details -- even before the trip begins. As a result, problems like hold-ups and sexual attacks are minimized under this scheme.

Second, passenger convenience. Passengers need not bring a car and brave the traffic, look for parking later, and privately owned cars are generally cleaner than taxi and drivers tend to be friendlier than the average taxi drivers.

There is an interesting study comparing Uber, Grab and conventional taxis done last year by UP Civil Engineering graduate students and professor. The authors got 18 respondents for a travel diary survey and take trips for 30 days. Then they also conducted an availability survey to measure the number of available vehicles of Uber, Grab, and Taxi at a specified time and location. The study has six tables, I summarized the results for Tables 2, 3 and 6 below.

The numbers show the following:

1. Conventional taxis have (a) lowest ratings by passengers, (b) highest percentage of complaints, more than 3x that of complaints with Grab and Uber, (c) 2nd to Grab in trip rejections, and (d) lowest cost for 10 trips, though the difference is not high compared with Uber.

2. Grab cars have (a) highest reliability and availability of vehicles, (b) highest cost per kilometer, (c) lowest % of complaints but small difference with Uber, (d) longest booking time, mainly due to (e) highest trip rejections, 2x that of conventional taxis and 21x that of Uber.

3. Uber has (a) fastest travel speed, (b) lowest passenger cost per kilometer, (c) highest passenger ratings though small difference with Grab, (d) lowest booking time but also (e) longest waiting time before being picked up, and (f) lowest trip rejection, almost zero.

There seems to have some inconsistency in the Uber data: it has the fastest travel speed in kph yet it has the longest travel time to cover a slightly longer distance than those covered by taxis and Grab. Nonetheless, it is a good study, congratulations to the three authors.

Now the problem is with the government regulator, the Land Transportation Franchising and Regulatory Board (LTFRB).

Since July 2016, it has stopped accepting applications for TNVS.

As a result, recent cars that have registered with Grab and Uber since that temporary ban may be subject to state harassment.

The LTFRB imposes multiple bureaucratic requirements that involve around 16 to 21 permits from various government agencies. These include tax clearance from the BIR, business permit from DTI and LGUs, among others.

The usual requirements by Uber and other ride-sharing companies for their partner drivers are only four: having their own vehicle, a driver’s license, a background check, and insurance coverage for passengers.

One result of these multiple bureaucracies is fewer supply of TNCs drivers and cars compared to the big and rising passenger demand. Until end-2016, there were only around 7,000 Uber drivers in Metro Manila vs. some 682,000 registered Uber riders.

There is one important move that the LTFRB can do: rescind and reduce many of those multiple requirements to allow more Uber and Grab vehicles on the road, and make these fewer requirements be available to conventional taxis too. This may be done via administrative order.

If this will require legislation, Congress should heed the clamor of the citizens and passengers for safer, more convenient rides.

Government should learn to step back from too much bureaucratism and recognize the ingenuity and innovation of the sharing economy. Providing safe transportation to people who do not own cars or those who leave their cars at home is not a crime that should be slapped with multiple permits, fees and bureaucracies.

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See also: 

BWorld 121, The PH tax reform bill and tax policies in East Asia, April 10, 2017 

BWorld 122, Six more myths in the mining debate, April 13, 2017 

BWorld 123, Drug-related murders and criminal justice in Asia, April 23, 2017