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8 June 2016
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Govt gets cold feet on the digital economy

Chatra Kamsaeng

The government has made the digital economy policy a priority. What exactly is the digital economy? Basically, it is the use of information technology to improve any business by making it more efficient. In the digital economy, one of the most popular business models is a digital platform which matches consumers’ demand with suitable service providers and rigorously monitors service quality.

This, in turn, induces business competition by encouraging new players that are able to challenge incumbents without having to invest in huge assets or massive manufacturing capacity.

From the consumer aspect, business competition gives people more choice, better quality and lower prices. For instance, in Australia, Uber, the mobile app-based provider of private ride services, charges 20% less on average than ordinary taxi fares, according to research by Deloitte.

Take another example. In India, competition among app-based ride service providers is so intense they’ve now got to the point where they are offering free Wi-Fi to passengers.

Back in Thailand, the government has sent a signal to the public that it is keen to promote the digital economy. A series of big events has been held to publicise the policy across all media. It has also announced investment promotion policies for investors.

But in practice, officials have discouraged the digital economy. Recently, the Department of Land Transport ordered GrabBike and UberMoto, two-mobile applications for hailing motorcycle taxis, to shut down. At the same time, it allowed Go Bike, a similar app developed by the Motorcycle Taxi Thailand Association, to continue to operate legally.

One of the reasons given for halting GrabBike and UberMoto was that their presence is unfair to traditional motorcycle taxi queues (aka win motorsai ) because “it takes away passengers from legally-registered providers”. This suggests the Department of Land Transport does not want to allow competition in this business. That raises the question: Why should there be only one motorcycle taxi system?

Because public transportation involves the safety of the public, regulations are set to maintain service standards and protect consumers. Granting licences is a means of quality control. It obliges service providers to follow requirements such as charging reasonable fares and checking their vehicles regularly. If their services are poor, the authorities can order them to improve or revoke their licences in the worst cases.

Thailand opts for a licensing system to control the quality of motorcycle transport services. Drivers are required to have a public motorcycle driving licence, public motorcycle plate and register to a motorcycle taxi queue. Once they are registered, the drivers are eligible to wear a numbered vest, which is considered their “uniform”.

However, readers might have had experience of legally registered motorbike taxis charging questionable fares exceeding the rate set by the law. Some might also have experienced careless riding.

On the other hand, GrabBike and UberMoto drivers generally offered better service even though they usually do not register with officials. Fares are transparently calculated and are lower than the rate set by law. They also have a system for controlling the quality of their services by allowing passengers to rate their satisfaction immediately and monitoring their positions on a real-time basis. Drivers with a score below a certain level cannot provide a service. Therefore, people switch from traditional riders to the new ones.

Thus, law enforcement against GrabBike and UberMoto excludes consumer choice instead of lifting service standards. Even though those traditional drivers offer service on a mobile-app platform, Go Bike, the improvement of service quality is questionable as there is now only a conventional system of regulations as there was previously.

In fact, people who want to be motorbike taxis are worse off from this order, too. This is because the entry fee to operate as a win motorsai extracts a large portion of operating profits.

For instance, a vest to operate in some Sukhumvit areas of Bangkok can cost as much as half a million baht. Some drivers report they have to pay other fees to influential people in the area.

Technically, this order protects the economic rents inherited in the licensing system, not the consumers and the drivers.

The motorcycle taxi case shows the authorities are not in reality in favour of a competitive economy and a digital economy. This is not a good sign for the economy in the long run.

If it wants to usher in a digital economy, the government needs to consider these following issues: Free competition which should be promoted wherever it can. The authorities/regulators might set minimum requirements aimed at protecting consumers, but these should not serve as barriers to newcomers.

Rules should apply equally to all businesses. It is unfair if conventional businesses pay taxes, but online ones do not. Another example is AirBnB, the peerto-peer accommodation application, which may not be supervised by hotel laws governing traditional accommodation and hotels.

Finally, the government should have a clear stance on labour protection. In many cases, these business platforms act like middlemen between service providers and customers, and the relevant labour law, including some social welfare scheme, might not include such service providers.

Chatra Kamsaeng is a researcher at Thailand Development Research Institute (TDRI).

First published: Bangkok Post on Wednesday, June 8, 2016