Why won’t Hong Kong embrace sharing economy?
City’s door is shut for Uber, AirBnb and bike-sharing companies
Ever since the arrest of 22 Uber drivers in May in a three-week undercover operation, Billy Kwok, 41, feels like he is tempting fate each time he takes orders from its ride-sharing app.
The drivers have been accused of not having hire car permits or third-party insurance. Their arrest followed a landmark court ruling in March that saw another five drivers fined HK$10,000 each and banned from the road for a year.
However, despite his predicament, Kwok cannot give up his job because he is the sole breadwinner for a family of four.
Formerly a taxi driver for four years, he became a full-time Uber driver a year ago after being told he could earn a lot more with the ride-hailing firm.
As a cabbie, he earned slightly more than HK$20,000 a month but he is now able to make HK$40,000, which has enabled him to buy a second-hand car to rent out to another Uber driver.
“Besides the higher income, I can now spend more time with my family because the flexible business model allows me to take days off at public holidays and whenever I like,” Kwok says.
He believes the crackdown is responsible for a 30 per cent slump in the number of Uber drivers online, even though demand has held up.
“I don’t mind taking the risk of being arrested as I will be more careful in screening clients. I just fear Uber may be forced to close due to the government clampdown. Then everybody will lose their jobs,” Kwok says.
Uber Hong Kong, which was founded three years ago, has so far served a million riders in the city, using more than 30,000 drivers, 80 per cent of them working part-time.
Despite repeated calls by Uber for it to be properly regulated so it may operate legally, the government has refused and insists it must abide by the current law that limits the number of hire car permits at 1,500 and does not cater to its business model.
But Uber is not the only platform from the sharing economy that poses a regulatory challenge for the government.
Airbnb and Gobee.bike, home and bike sharing operators, have also become a headache for both the government and others working in those markets.
Speaking at the Legislative Council last month, Secretary for Innovation and Technology Nicholas Yang Wei-hsiung warned: “Anyone operating illegal businesses in the name of the ‘sharing economy’ is unacceptable.”
The emergence of online platforms from the sharing economy has raised questions as to how the government should balance growing demand for technology-driven services and the need to ensure public safety and a robust business environment.
Airbnb, which enables homeowners to rent short-term accommodation to travellers, is now used as an alternative to hotels, guest houses and property agents.
However, the government says premises offering sleeping accommodation for a fee for any period less than 28 days must be licensed under the Hotel and Guesthouse Accommodation Ordinance.
Offenders are liable to a maximum fine of HK$200,000 and two years in jail. The Home Affairs Department says this is to ensure that premises meet building and fire safety standards.
As of this month, there were more than 300 Hong Kong listings on Airbnb, compared with some 6,000 a year ago. This was despite a low number of prosecutions, 15 last year, and 18 in 2015.
Ellen Wang, a Tsing Yi homeowner, is one of those not too worried by the government warning and has listed one of the two bedrooms in her 500 sq ft flat on Airbnb since November. “I don’t expect it to make me a fortune, I just hope it helps pay my mortgage,” says the finance industry worker, who makes about HK$3,000 to HK$4,000 extra a month. “If it becomes too risky one day, I can just quit. It is not a big deal.”
Traveller Wang Yan prefers to use Airbnb for its human touch. “I always like to experience the way locals live when I travel,” she says.
As regards the bike-sharing rental market, the government may appear more tolerant but it is not short of controversy.
Leading player Gobee.bike has been plagued by problems, ranging from vandalism and theft of bicycles to personal data leaks and complaints of unfair competition.
The start-up has 2,400 smart bicycles spread over Sha Tin, Tai Po and Ma On Shan, with plans for further expansion. Users may rent by simply scanning a QR code and park anywhere they like.
Joseph Sung, founder of another bike-sharing player, HobaBike, believes the growth of such platforms in the city is inhibited by a sense of “protectionism” within the government.
“I feel the government is not doing enough to upgrade the infrastructure and laws to enable more sharing economies to prosper. There is a sense of ‘protectionism’ and “traditionalism” within the government,” he says.
“Some rules are outdated and they inhibit the growth of these businesses. It seems there are conflicts of interest between government departments and no single department can really drive the ‘new’ economy through.”
Sung points to the example of Singapore, which has legalised Uber, saying it has become a leader in technology and attracted great investment.
Lawmaker Charles Mok, who represents the information technology sector, says such businesses may offer flexible job opportunities and generate extra income for home or car owners.
He believes a tough stance was taken against Uber and Airbnb because they contravened the law, unlike the bike-sharing concerns.
However, Mok criticises the government for being overly rigid towards emerging businesses and wants it to be aware of public needs. “Laws can be changed. The minibus trade was also illegal decades ago until it was regulated in 1969,” he says. “The government can study these emerging businesses and see if there is a big public demand for their services. If so, it should consider relaxing the relevant laws.”
But Mok admits the reluctance to change the laws, especially for ride-hailing operations, is partly due to a desire to protect vested interests in the transport and hotel sectors. “For Uber, it is very clear the government doesn’t want to offend the taxi industry as many taxi operators have come out in force to protest against it.”
He fears a backlash from the public and chaos in the business environment unless the government changes course.
For example, Mok says, if Gobee.bike remains unregulated new rivals may seek a share in the bicycle rental market leading to wide open spaces being occupied by their machines. “The government should be more open-minded and embrace new business models despite the many challenges. It needs to strike a proper balance in stakeholder interests.”
Mok suggests it consider the approach adopted by Singapore towards Uber. “The government can set up a regulatory regime under which Uber and its drivers need to register. It can set a limit on the number of daily trips each driver is allowed to make,” he says.
“For Airbnb, it can follow Japan by allowing homeowners to let properties to guests for up to 180 days a year.”
He believes legalising such platforms will also give local start-ups a chance, as in the case of Singapore, where taxi company Grab competes with Uber.
Professor David Cook, at the economics department of the Hong Kong University of Science and Technology, believes all three platforms would be a great boon to the economy, particularly Uber and Airbnb.
“I think these two will allow scarce resources to be used more effectively, which is particularly important in Hong Kong where living space is in such short supply,” he says.
“Uber will allow for transportation to be more efficient and people with cars to act in an entrepreneurial way to supplement their salaries.”
But he has doubts about the bicycle market owing to the lack of city cycle trails. “I am not sure how many parts of Hong Kong are suitable for casual biking. But we should let the market decide that.”
Cook believes new entrants to the market would increase competition for existing concerns and, in the case of legalising ride-hailing platforms, the value of taxi licences, which currently cost around HK$6.5 million each, would drastically drop.
Despite their impact on the relevant sectors, he has no doubts these platforms should be allowed and encouraged to enter the Hong Kong market.
“If we are committed to having a modern, smart city, these services will be a necessary part of achieving this goal,” he says.
Maybe the latest consultancy study commissioned by the government offers some glimpses of hope for ride-sharing firms such as Uber.
It says car pooling and sharing should be encouraged in Hong Kong as part of a government push to build a smart city.
But eventually, it will be up to the recently installed government to decide if it wants to embrace or reject these smart businesses.