QUESTION TIME | Legalising Uber and Grab, current disruptors of the taxi market, is a wise, far-sighted move although the imposition of licensing requirements for vehicle-hailing operators and licences for drivers is not welcome and unless fairly implemented has much room for abuse.

Taxi drivers are likely to lament the passage of the bill currently in Parliament to legalise the vehicle-hailing services at first. Upon reflection, they should welcome it. At long last, the majority of them are freed from the long-suffering, patronage arrangement of working for their licence owners first before what they earn goes into their own pockets. More on that later.

If the government departments concerned such as the Commercial Vehicles Licensing Board (CVLB) and the Land Public Transport Commission or Spad set low fees and do not put bureaucratic and other hurdles for licences, it will see a major overhaul of our taxi system for the better - and the government won’t have to lift a finger to do anything.

The public is already used to the cheaper fares, superior service, better vehicles, more polite and informed drivers, reliability and absolutely no attempt to cheat as among some of the key benefits of using Uber and Grab.

This is indeed a very welcome disruption of the notorious taxi service in Kuala Lumpur for many, many years now rife with rudeness, arrogance, unreliability, exorbitant fares without using meters and often threats. Some of the taxi drivers have even resorted to violence against the drivers - and passengers - of the vehicle-hailing services.

In that respect, it is great to learn that the proposed legislation even includes amendments to the Land Public Transport Act to deter such incidents. A proposed amendment to Section 200 of the Act punishes those who assault, hinder or obstruct intermediate business licensees and other licence holders or their employees, although the punishment should be more severe. Those convicted can be fined RM1,000, or jailed three months, or both.

Yes, all Malaysian taxi drivers are not bad but it would be correct to say that the vast majority act under very difficult circumstances because they don’t own the taxi licences which are given as a tool of patronage to reward individuals and connected companies.

These licences are then purveyed under conditions very disadvantageous to the taxi drivers. They have to pay at least RM55 a day for the use of the vehicle and be responsible for all maintenance, repair and fuel for the vehicle. By the time they can actually put money in their pockets, they must collect about RM70 - RM55 for rental and perhaps RM15 for fuel.

This licensing is at the heart of the problem of taxis in Kuala Lumpur and Malaysia - most taxi drivers don’t own their licence. All attempts to solve the taxi problem have failed because middlemen were taking away a huge portion of the earnings of taxi drivers without doing any work, inflating taxi fares.

Paradoxically, it is Uber and Grab who will show the way out of this problem.

If you own a car which is not too old and which is in good condition, you can drive and collect fares based on their system but you pay them a commission ranging from 20-25%, their drivers tell me. So, you are already profiting from the first trip you make with them because the cost of petrol is much lower than the fare even if you give 25% away.

Now, all taxi drivers have to do to throw away the yoke of not owning their licences which hang heavily around their necks is to become a Uber or Grab driver. But where are they going to go to get their own car? Well, they simply purchase them.

If they buy a second-hand Proton Saga or Myvi, they could get one for perhaps RM40,000. Downpayment would be RM4,000, leaving RM36,000 as loan. Assuming a seven-year repayment and a non-declining interest rate of 2%, the monthly repayment comes up to less than a mere RM500 a month for seven years - compared to the current rental alone for a taxi licence of a huge RM1,650 (RM55 x 30) per month, more than three times the instalment.

Soft loans

That’s a great disruptive service that Uber and Grab provide by enabling anyone who can drive and has a licence to earn a decent living or to supplement their income by driving as much or as little as they want. Uber/Grab drivers claim to be able to earn as much RM5,000-RM7,000 a month!

Okay, the taxi services as we know it are set to become dinosaurs but if they are not able to move with the changing times, then they should. My guess is the taxi service will change - it will have to improve as competition is introduced into the sector. Perhaps they may want to set up their own vehicle-hailing service and challenge Uber and Grab.

The government in the meantime can help by providing soft loans to those who do not have even the down payment to purchase a car. So instead of handouts through BR1M (Bantuan Rakyat 1Malaysia), a portion can be set aside for say a RM5,000 interest-free revolving loan which can be used as a down payment to buy a car.

And please, don’t go setting requirements such as you must buy a Proton to qualify. Let the driver make his own assessment of what is best and then purchase the car - the government should only be concerned with providing the soft loan and ensuring that it is used.

Let’s bear in mind that licensing has caused huge problems in the past and therefore there is every need to ensure that licensing, not just here, but in every other area should be kept to a minimum to avoid plain-old bureaucracy and corruption.

Is it necessary to license vehicle hailing services? Perhaps. But let’s be reasonable about it and make sure it’s based on measurable criteria. So long as the criteria is met, then the licence should be given - no more questions to be asked.

Should you license drivers? Really, no need to. Ensure that the vehicle-hailing services have a good system for vetting drivers and let them be responsible for it. As Grab/Uber users know, there is invitation for feedback on every drive - and a bad driver gets blacklisted very quickly.

Also every drive is logged and the driver’s identity known to the vehicle-hailing service which considerably reduces the likelihood of crime in the vehicle - a serious problem in the past.

Strangely, the proposed legislation has severe penalties for operating vehicle-hailing services without licences and for drivers without the appropriate licence - RM500,000 fine or up to three years’ jail or both for the former and RM1,000 to RM200,000 and/or up to two years’ jail for the latter. Compare this with the relatively small penalty for assaulting Uber/Grab drivers for instance - RM1,000 or three months’ jail or both. That’s terribly unfair.

The good move is that Uber and Grab and others like them are allowed to operate but the bad thing is licensing may become a serious hurdle. Let’s hope that in everybody’s interest except owners of taxi licences, this does not stand in the way of better public transport for all.

And let’s hope that when the next major series of disruptive service providers come on the scene - in financial services perhaps - the government is more prepared to adopt it for the betterment of its own citizens.

P GUNASEGARAM says that licences are often little more than a tool for patronage and corruption. E-mail: t.p.guna@gmail.com.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.