By Alex Liu

Hong Kong, 29 July 2024: After years of impasse, Hong Kong is inching towards effective regulation of online ride-hailing services. The government is proposing a year-long study of point-to-point transport needs before implementing a licensing system that would see the likes of Uber finally operating within the law. Many would suggest this is long overdue.

Background

The battle lines in this saga are clearly drawn: Uber and other platforms operate illegally in this city as the vast majority of their drivers do not possess a hire-car permit. It is well established that such drivers are breaking the law, but passengers are not. Thus, Uber and similar services are hugely popular and widely used.

The taxi industry staunchly opposes these platforms, which it accuses of unfair competition and stealing business. Taxis are licensed and permits are a tradable commodity worth millions of dollars. Yet they have a poor reputation with rising complaints about rude drivers, overcharging, cherry-picking passengers, taking circuitous routes and lack of electronic payment.

Hong Kong does have a private service hire-car permit system, but it is limited to 1,500 permits and the application process is complicated, with each one subject to approval by a selection board. Hence, only about 1,115 have been issued.

Latest proposals

In a paper submitted to lawmakers, the Transport and Logistics Bureau has suggested regulating online platforms through licensing. The Transport Department will conduct a study – expected to take 12 months – of commuter needs before deciding on the details, such as how many licences will be issued and to which types of vehicle.

It has studied how cities such as Singapore, Shenzhen and London have handled matters, noting that drivers from ride-hailing platforms are required to have adequate insurance and must have completed health checks and background screenings.

In the meantime, the authorities intend to further crack down on illegal ride-hailing. This will include suspending the licence and registration of vehicles involved, as well as impounding them. Those caught behind the wheel would face a driving ban, possibly for 12 months.

Taxi fleets

Adding to the mix is the impending launch of taxi fleets, a new regulatory regime designed to enhance services. The government has received 15 applications for five taxi fleet licences, with services expected to begin by the end of this year. The legislation stipulates that a fleet should include 300 to 1,000 urban taxis, or 100 to 350 in the New Territories. Vehicles must be less than three years old, offer e-payment options and be installed with a surveillance camera.

As well, it is worth noting that two high-profile regulatory bodies have entered the debate. The Competition Commission has urged the government to recognise the importance of online ride-hailing services and enable fair competition with taxis. The antitrust watchdog says any new regulatory framework should “encourage innovation” and “provide strong incentives” for the sector to introduce technologies that assist both consumers and hired drivers.

Consumer Council chief executive Gilly Wong, meanwhile, has suggested that the current hire-car permit regime “may not be the best starting point” for regulation of the ride-hailing industry and that a new system could be required. She points out that vehicles registered under existing hire-car permits are mainly used for private purposes, hotels and travel services.

Summary

There are concerns among lawmakers that the proposed 12-month consultation process is too long. As well, there is a lingering perception that the authorities are overly bothered with protecting the taxi industry rather than prioritising citizens’ needs. That said, it should be acknowledged that there are individual taxi drivers who have bought their licences as a lifetime investment.

While the government’s latest proposals fall well short of wholesale reform of this city’s point-to-point personalised transport sector, they at least pave the way for a future framework under which traditional taxi services and ride-hailing platforms will co-exist. This is essential for Hong Kong to preserve its image as a well-connected and digitally advanced city.

Alex Liu is Managing Partner of BC&C. Among his many official appointments, he is a Panel Chairman of the Transport Tribunal, which hears appeals against decisions made by the Commissioner for Transport on matters such as vehicle registration and licensing, driving licences and hire-car permits. He can be contacted at alex@boasecohencollins.com.