How Uber can spur improvements in Hong Kong’s taxi service

Michelle J. Tao says while the government has the admittedly difficult task of balancing the interests of taxi licence holders with consumer interests and job opportunities, introducing more competition to the industry would serve the greater good

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A passenger hails a cab in Hung Hom during a typhoon last year. Photo: Bruce Yan

Published: 3:21pm, 31 Aug 2017Updated: 7:09pm, 31 Aug 2017

Uber just made a long-shot pick for its chief executive. The question is whether it is a long shot for Uber to operate freely in the freest economy in the world – Hong Kong.

Headlines on the arrest of Uber drivers in Hong Kong have been a recurring theme since the San Francisco-based start-up (“illegally”) entered the local market in 2014. The rationale given by the government is that Uber drivers lack a permit to carry passengers for hire, and that they may not have purchased third-party insurance to cover their customers. In February, Uber addressed the insurance concern by purchasing a plan from AIG that offers coverage of up to HK$100 million. The permit issue, however, is more difficult to deal with.

It is interesting to contrast Uber’s situation in Hong Kong with that in Singapore. There, the certificate of entitlement for operating a private car over a 10-year period costs up to S$51,000 (HK$294,000). This implies only well-to-do Singaporeans buy private cars, in line with the government aim of controlling the number of cars on the road. As a result, few private car owners would like to work for Uber.

In contrast, the licence for private cars in Hong Kong costs just a few thousand dollars a year. This means a lot of young people in Hong Kong would like to use their private cars to drive for Uber.

Hong Kong puts brakes on Uber in its road map for the future

The main difference is in the handling of taxi licences. The Singapore government does not sell taxi licences, but allocates a pre-set number to taxi companies. And it has the right to adjust the number and annual fees.

In Hong Kong, however, the government sells taxi licences, which can be used perpetually. As the number is quite small (18,163), they are very expensive – up to HK$7 million in 2013. While the number of taxis per 1,000 people in Hong Kong is much lower than that in Singapore (2.5 versus 5.3), the number of Hong Kong taxi licences has not been adjusted since 1994, as the government fears affecting the value of existing licences.