Time to regulate Uber, Grab given their dominant role today

THAT Singapore could soon impose regulations on private-hire car services Uber and Grab may seem like a clamp down on disruptors. Both of which have transformed the transport industry here in the last five years. But regulations in this case are in fact a reflection of an economy that embraces innovation and refuses to be controlled by big entrenched companies such as ComfortDelGro.

This week, Second Minister for Transport Ng Chee Meng announced in Parliament that private-hire car services could be regulated and even subject to licensing in the future to protect the interests of commuters and drivers, as the government undertakes a review of the point-to-point transportation sector.

He also acknowledged the growing dominance of Uber and Grab, which have each expanded their networks by partnering homegrown taxi firms. He assured that the government's review will look into ensuring that the ride-hailing market remains "open and contestable", and that no one single player will dominate the industry to the detriment of commuters and drivers.

Typically, when a country starts regulating disruptors and new business models, it is said to be getting in the way of innovation. But this is not quite the case for the transport sector in Singapore.

Regulating Uber and Grab not only ensures that they comply with guidelines and high standards while serving commuters and drivers, but also recognises that these disruptors have a place in Singapore's economy.

Uber Singapore chief Warren Tseng said: "We are delighted that the government has recognised the private-hire car industry has become an important part of Singapore's land transport system where commuters have benefitted the most and taxi drivers are also starting to reap some of the benefits."

Other industry players also welcomed the government's decision to review the point-to-point transportation sector. Grab said it has "always prioritised advancing the interests of customers" and will work closely with the regulators to "ensure the ride-hailing industry caters to commuting needs and complements the public transport network in Singapore", while Comfort noted that the review is necessary for the "long-term sustainability" of both the taxi and private-hire car sectors.

The impending regulation suggests that the government sees Uber and Grab as having delivered innovation to the transport sector and playing an integral role in boosting transport service standards, but needing more guidance in providing safe rides to commuters and secure jobs for drivers. Notably, Mr Ng cited "safety" as an area Uber and Grab should bear greater responsibility in.

The timing of the government's announcement is noteworthy. Uber and Grab entered Singapore in 2013 and in the last five years, the government took its time to observe the impact of such services here as well as globally. It adopted a wait-and-see approach - much like it has done with disruptive technologies in general - as opposed to hastily coming down on them.

The timing of the announcement is also noteworthy given recent rumours that Uber will be selling its South-east Asian business to Grab. It is a move believed to help Uber reel in its costs in the region - where it is bleeding from intense competition with Grab and Indonesia's Go-Jek - in preparation for an initial public offering as soon as next year.

Both Uber and Grab have declined to comment on the deal. In an article on Thursday, Bloomberg reported that Grab is "close to finalising a deal" to buy out Uber's operations in "certain markets in South-east Asia" and offering a stake in itself. Grab and Uber may even sign a deal as early as "this week or next", the same article said.

Moreover, ComfortDelGro only last December announced that it would buy a 51 per cent stake in Uber's private car rental subsidiary, Lion City Holdings. The proposed tie-up, through which both firms will make taxis and private-hire cars available on each other's apps, is still subject to an antitrust review by the Competition Commission of Singapore.

Uber is said to have about 14,000 vehicles under Lion City, while ComfortDelGro has 13,000 taxis. In comparison, a merged Grab and Uber will have a combined network in Singapore of some 55,000 taxis and private-hire cars - more than four times ComfortDelGro's fleet. The Uber-Grab merger will imaginably, too, be subject to an antitrust review.

What is comforting is that the government recognised that should one taxi or private-hire car operator become dominant, commuters may have to bear with higher fares and lower service standards, and drivers will have to put up with conditions set by the company, or risk losing their jobs.

Mr Ng said in his speech on Wednesday: "We must make sure that commuters and drivers continue to have options, and that no one single market player will dominate the industry to the detriment of commuters and drivers."

In regulating Uber and Grab, Singapore is saying that it welcomes "agents of creative destruction" that bring and inspire new products and business models into the economy.

At the same time, it is levelling the playing field for both disruptors and the disrupted. This way, the incumbents can focus instead on improving their services. In regulating Uber and Grab, Singapore is also saying that it knows that any economy controlled by big, entrenched companies will have little space for disruption and innovation.

The challenge now is for the government to regulate and connect both the ride-hailing and taxi sectors in a way that will unlock the potential of the transport system for everyone, and improve the lives of commuters and drivers, and the city as a whole.

READ MORE: Grab 'close to deal for Uber's South-east Asia business'