Taxi industry reformation — pros and cons

POSTED BY Nigel Andretti ON 19 August 2016


THE Land Public Transport Commission (SPAD) has finally unveiled the Taxi Industry Transformation Programme (TITP), aimed at reforming traditional taxi businesses and legalising private vehicles for e-hailing services.

The TITP comprises 11 programmes. Responses from drivers, operators and passengers were varied, as they had conflicting interests. The way forward is to hold intellectual discussions to realise their full potential, not emotional outbursts by issuing nonsensical statements.

1. Regulating e-hailing as an intermediary service under the Land Public Transport Act 2010

The Act will be amended to require e-hailing companies to be incorporated in Malaysia and subject to local laws and taxes, e-hailing drivers to obtain Driver’s Card from SPAD and their
private vehicles passed road worthiness inspections.

Meanwhile, these companies and drivers are to register with SPAD to avoid legal action as their services remain illegal until the law is amended.

Many Uber and Grab drivers have been harassed by cabbies. The most unfortunate ones had their vehicles impounded by the authorities, while e-hailing companies had escaped scot-free.

To make amends, they should be compelled to make a sizeable contribution towards a pool fund for training. For example, Malaysian Airlines and Air Asia were fined RM10 million each by the Malaysia Competition Commission as their market-sharing agreement was deemed anti-competitive.

2. Issuance of individual licences and Government cash grant for drivers exiting the ‘Pajak’ system. From Sept 1, individuals may apply for metered taxi and hire car (non-metered taxi) permits but candidates with criminal records and unsettled traffic summonses will not be considered.

To qualify, one must be a Malaysian and not a bankrupt. There was no mention of age limit, and rightly so, as physical and mental health are far more important.

While the Government is trying to assist those who were declared bankrupt to continue with life without the debt burden, including automatic discharge, SPAD is adding an unnecessary condition.

If those with permits are unable to obtain bank loans, they could easily seek financing from
taxi companies, albeit at higher interest rate.

Cabbies ceasing to pay installments for rental-purchase of their taxis would have to surrender
the vehicle or repossessed by taxi companies, which do not take the trouble to institute bankruptcy proceedings, unlike banks that have made 30,000 registered car owners bankrupt.

Qualified cabbies aborting the ‘pajak’ system will be given a cash grant of RM5,000 by the Government for the purchase of a new taxi after receiving an individual permit.

However, those who are not qualified for taxi permits will continue making the loudest noises, made worse by section of the media pandering to their antics.

3. Liberalise vehicle model for taxis

Vehicles allowed for taxis will no longer be based on minimum engine size of 1.5 litre but on
a minimum 3-star safety rating by ASEAN New Car Assessment Program (NCAP).

National cars that qualify are the Perodua Axia 1.0 and Proton Saga 1.3 with 3-star NCAP rating. Three Perodua models with 4-star rating are the MyVi, Bezza and Alza, and two Proton models with 5-star rating are the Iriz 1.6 and Preve 1.6.

The Perodua Bezza 1.3 and Proton Saga 1.3 would be the most popular models for budget taxis in future. The volume is sufficient for them to be factory-painted in taxi colours of red and white.

4. Standardise taxi rental contracts with statutory contract terms

Similar to hire-purchase agreements under the Hire-Purchase Act 1967, rental-purchase agreements will be standardised and controlled.

The inclusion of rent-free day for PUSPAKOM inspection is nothing new but the introduction of annual and sick leaves, deposit refund and comprehensive motor insurance could backfire.

Like all self-employed people, cabbies can choose when and where to ply their trade, taking whatever leave whenever they like. They grant leave to themselves without having to apply.

But many cabbies are immature, asking for leaves, EPF and Socso benefits when they are actually customers and not employees of taxi companies.

Granting cabbies these so-called benefits would be similar to asking the banks to do the same for car owners who have taken hire-purchase loans.

Comprehensive motor insurance should remain an option as additional costs would be transferred to the driver, not borne by taxi companies.

Similarly, the deposit is a down-payment for a loan, and if the amount is to be refunded, the driver will have to pay higher installments.

The current arrangement is fine as the vehicle belongs to the driver upon full settlement of the
loan, and can be sold to raise payment for a new taxi.

5. Introduce mandatory KPIs for taxi operators

Taxi companies have already been downsizing. With the introduction of KPIs, the smaller ones will close shop sooner.

It would be unfair and unnecessary for them to be responsible for the drivers’ minimum hours
of operations and quality of the taxis as the vehicles are owned and maintained by the drivers.

Minimum operating hours would be necessary if the number of taxis are limited and permits frozen, but will no longer be the case as the market will be swarmed with more individually-owned taxis and e-hailing vehicles.

Cabbies can be made to download mobile apps on their phones and offered incentives to run
more trips especially during the rush hour, but some will not respond as they prefer their old

These elderly drivers are not much help but they also do no harm and should be allowed to
continue as they please and they cater to a niche market.

6. Impose stringent pre-screening processes

Kudos to SPAD for taking up the role of gatekeeper by issuing the Driver’s Card only after
stringent screening processes on both taxi and e-hailing drivers. The health checks should be
conducted annually for both physical and mental, apart from criminal records and traffic offences.

7. Increase service standards using Merit and Demerit System

SPAD will work closely with the Road Transport Department on the Kejara Demerit Points System and drivers will also be monitored by SPAD’s Merit System. The carrot and stick approach is bound to improve service standards if implemented well but records were dismal.

8. Rationalise metered fare structure

In March last year, budget taxi fares were increased to RM3 for flag fall, 25 sen per 200 metres or 36 seconds, with Teksi 1 Malaysia (TEKS1M) slightly higher at RM4 and 30 sen respectively.

Instead of helping TEKS1M drivers to offset the higher costs of operating a Proton Exora MPV taxi, the measure backfired as they were shunned by most passengers who are price sensitive although it was much cheaper than executive taxis at RM6 and 40 sen respectively.

It was the same when premier taxis were introduced in 1998 with starting fare of RM4 and RM1 per km while budget taxis were RM2 and 67 sen per km respectively. The rates for new TEKS1M will be the same as budget taxis.

9. Rationalise zonal fare

Zonal fares are unfair to either the driver or passengers but were a safe method as meters could be tampered. But with the advent of the Global Positioning System available at smartphones, passengers would be able to know the quickest route and shortest distance to their destinations, deterring drivers to cheat.

10. Dynamic fare for metered taxi providing e-hailing services

Taxi drivers are allowed to collect e-hailing fares should they choose to participate but they are in a no win situation.

E-hailing apps are prepared to bear operating losses by charging rates lower than regulated fares as they are more interested to capture market share to boost their company valuation.

For example, Uber was valued at only US$60 million in 2011. Today, it is over US$68 billion and least concerned that it had never been profitable.

Cabbies using taxi apps would still lose out to ride-hailing apps which will always charge lower fares, although both services are good as all mobile apps make sure of this.

Although many cabbies have switched to driving private vehicles to provide e-hailing service, it would be difficult for those driving taxis to accept lower fares or passengers opting to use them as their taxi registration would appear weird on the smartphone screen.

Announcing that this measure can boost the income of taxi drivers would be akin to rubbing salt to the wound.

11. Establish taxi driver’s improvement programme

Taxi drivers will be required to undergo training by providers appointed by SPAD on taxi driver orientation programme, unleashing entrepreneurship in taxi drivers, treatment towards passengers, safety and maintenance.

While training helps, taxi drivers will change little. Even our most educated civil servants and well-trained enforcement officers easily fall to corruption, however religious they may appear to be.

Millions of traffic offences occur daily because there is no fear of being caught. The same taxi driver that tries to cheat passengers whenever he can would be at his best behaviour operating a food stall.

Those who pick up passengers using e-hailing apps are fully aware that they can be deactivated by poor ratings from passengers.

Taxi apps can do the same but are less strict because of competition from a dozen operating in the local market when two are enough.

The best way to imbue a service culture is for these taxi apps to consolidate and compete against e-hailing apps. These taxi apps should offer training to the drivers and participate in the Taxi Driver Accreditation Programme.


Sorry, no posts matched your criteria.