Call to relax regulations on the classification of ride-hailing firms

Classifying ride-hailing firms as taxi firms would be a great obstacle to the development of this business model

This was stressed at the seminar on the draft decree to amend and supplement Decree No.86/2014/ND-CP on business and conditions for transportation business held by the Central Institute of Economic Management under the Ministry of Planning and Investment.

At the seminar, the experts and representatives of businesses had a long discussion to get an overview of transportation business conditions as well as figure out the difficulties arising from the draft decree to amend and supplement Decree 86. Meanwhile, the seminar also sought feedbacks and recommendations on the drafting and enforcement of the new regulation.

As Industry 4.0 is gaining momentum in the modern economy, companies are now increasing their focus on technology, specialisation, and business optimisation to cut down on processes. The advance of technology gives rise to new models of transportation, like ride-hailing services. Foreign ride-hailing firms like Grab and Uber have brought more options and flexibility for customers, while inspiring local companies like Aber and Vato to join the market.

Technology platform providers are investing in this subsector of the transportation industry, meaning that they are not directly engaged in the transportation business and do not own a fleet of vehicles. Ride-hailing firms specialise in developing modern software with the application of Big Data and artificial intelligence to connect customers with drivers and calculate fares for the trip. Every user has their own accounts to maximise efficiency.

Meanwhile, Decree 86, which was developed prior to the Industry 4.0 era, has become obsolete in regulating new business models. If the new regulation defines ride-hailing firms as providers of transportation services, it would blunt the development of the sharing economy and remove the benefits of Big Data and artificial intelligence. The move would be a great step back in the country’s socioeconomic development.

Nguyen Dinh Cung, director of the Central Institute of Economic Management, stressed the need for a change in the management mindset of policy makers. He cited the latest draft decree to amend and supplement Decree 86 that the Ministry of Transport (MoT) is collecting public feedback on.

According to Cung, technology-driven business models still face certain technical barriers due to the lack of encouragement and support. However, it is not necessary to put ride-hailing firms like Grab and Uber under the same hat with traditional taxis, as this would kill new business models and prove a serious mistake.

He said ride-hailing firms that primarily use technology cannot be defined as transportation businesses. He cited Uber and Grab using software to match customers with the closest vehicles and calculate fares for the trip in order to meet transport demand.

Business models like Uber, Go-Viet, and Grab’s will transform transactions to better balance supply and demand as well as efficiently calculate fares based on supply and demand. The technology platform will reduce costs, thereby offering lower fares for customers. However, he said that policy makers are planning to impose some new regulations on ride-hailing firms, which would lead to cost hikes for both businesses and customers.

“Policy makers should think practically from the market’s perspective to facilitate new technologies and business models rather than developing regulations as barriers for ride-hailing firms,” he said, adding that state management should focus on protecting and serving customers.

Economist Ngo Tri Long also shared his thoughts about the classification of ride-haling platforms and transport service companies into the same category. He said that the move would eliminate specialisation and adversely affect the development of technology platforms.

According to Long, Article 16 of Decree 86 asks tech companies to comply with regulations specifically tailored for transportation companies. He stated that the regulation will not only distort the nature of tech-based businesses but also undermine the overall benefits of technology.

“Unless we strongly object to Article 16, it will undermine digital innovation, place pressure on law enforcement, and increase business expenses, which will ultimately affect end-users,” he said.