The taxi trade is likely to win its fare-hike battle, as Hong Kong loses out again to vested interests

Mike Rowse says the sector’s hefty clout in key elections is why the latest fare increase request will be approved, in yet another reminder that innovation and technology often make for just empty talk in the city

PUBLISHED : Sunday, 29 January, 2017, 9:01am
UPDATED : Sunday, 29 January, 2017, 5:46pm

Taxi drivers are a wonderful source of information and gossip. They spend much of the day listening to talk shows on the radio or discussing topical issues with passengers and so have an excellent feel for the public mood. Foreign correspondents visiting a city for the first time, or revisiting an old haunt after a long absence, find them a useful resource for quickly getting a handle on local sentiment.

The trade in Hong Kong has submitted a request for a fare increase (the first since 2013), ranging from 16 to 18 per cent in flagfall, plus a rise in some other charges. The main reasons given are increasing costs and the need to boost drivers’ incomes. The proposals are now the subject of consultation with lawmakers, and later will have to be considered by the Transport Advisory Committee, the Executive Council and then be subject to negative vetting by the Legislative Council again.

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Despite the long and circuitous bureaucratic journey ahead, I am able to confidently forecast the outcome: there will be an increase; it will not be as much as the trade has sought; and, most of the benefit will accrue to taxi owners and relatively little to the drivers.

Taxi associations constitute the largest single block of electors in the transport constituency

Why will there be an increase? The taxi trade has a powerful say in the election of the lawmaker representing the transport functional constituency, and considerable influence over the appointment of 18 members of the Election Committee, which will elect the next chief executive in March. Taxi associations constitute the largest single block of electors in the transport constituency (36 votes out of 192, or close to 20 per cent). Thus a candidate with their support is well on the way to victory, whereas one without it has an uphill climb. Similar factors apply to the process of identifying the members of the Election Committee.

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Why will they not get everything they ask for? First, Transport Department and Transport and Housing Bureau officials must be seen to have acted to protect the public interest. The trade is aware of this, which is why they cushioned their opening shot with a wide margin, part of which can be easily conceded later. Then there is the matter of public acceptability. Amid all the talk of deflation and practically zero inflation, and the collapse of oil prices, one has to wonder what special part of the universe our taxis inhabit that has seen inflation in the order of 18 per cent.

One has to wonder what special part of the universe our taxis inhabit that has seen inflation in the order of 18 per cent

Then comes the tricky part: apportioning the spoils. Most of our 18,163-strong fleet is driven not by owners but by people renting from them for a charge per shift set by market forces. Thus, a driver pays for fuel and other running costs, plus the shift charge, and derives a net income. Take as an example three notional levels of monthly driver income: HK$15,000, HK$17,500 and HK$20,000. The owner’s interest lies in maximising his own income while attracting sufficient drivers and earning revenue. If he can find enough drivers to do the job at the lower net pay, he will calculate the shift charge to achieve that level. Only if he has to pay more to get someone behind the wheel will the shift charge be lower so that the driver’s share can be increased.

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The key point is that this calculation is entirely independent of the fare shown on the meter. We know for a fact how this “tug of war” has worked out over the decades because taxi licences are now worth around HK$6.5 million for a vehicle costing about HK$300,000.

Why is it that throughout Asia, governments have introduced legislation to regularise Uber and similar services while Hong Kong’s response was to arrest the drivers?

Then there is the matter of Hong Kong’s economic future. We know, and say, that it must be based on innovation and technology. So why is it that, in Singapore, you can pay the fare by credit card, but not in Hong Kong? Why is it that throughout Asia – not just in advanced cities like Singapore but also in developing economies like Vietnam, Indonesia and on the mainland – governments have introduced legislation to regularise Uber and similar services, while in Hong Kong, our response to this innovation was to arrest the drivers?

How will our hypothetical foreign correspondent feel when he gets in a taxi at the airport, asks the driver about competition from Uber and is told: “Don’t worry sir, we soon put a stop to that.”

The taxi fare saga is but one example. We can have a future built on innovation and technology, but only if we are prepared to confront vested interests when they stand in the way of progress.

Mike Rowse is the CEO of Treloar Enterprises and an adjunct professor at the Chinese University of Hong Kong. mike@rowse.com.hk