Ride-Hailing Debacle Exposes Gov't Resistance to Innovation

      October 11, 2019 13:52

      The government has issued a warning to ride-hailing app TADA which sought permission to boost its fleet of vans from the present 1,400 to 10,000 next year. Faced with fierce opposition from the established taxi lobby, the Ministry of Land, Infrastructure and Transport told TADA that its plan is "inappropriate" and threatened to revoke its license.

      The rapid growth of ride-hailing apps like TADA simply reflects consumer demand for dependable, convenient transportation services. By the same token it reflects their dissatisfaction with standard taxis and their drivers. The government has been trying to regulate the established industry with taxi licensing, but failed miserably both in terms of quantity and quality.

      Taxi drivers feel understandably threatened by the emergence of ride-hailing apps as they reel from overcapacity and declining demand. An estimated 60,000 taxis are needed to meet demand in Seoul, but there is an oversupply of more than 10,000. Demand has declined due to the availability of late-night buses and other alternative means of transportation, but no small part of it was consistently bad service. Now the taxi industry is feeling the heat, but it has been slow to improve its services and accept downsizing measures.

      The ministry said it will only authorize new ride-hailing services like TADA as long as they buy taxi licenses. This entry barrier has ended up giving an advantage to big conglomerates, which have the capital to pay for them but strangles fresh startups in the crib. Messaging behemoth Kakao has started offering ride-hailing services and recently acquired a large taxi company. Is giving only big players a chance what the government considers an example of its much-trumpeted support for innovation?

      Red tape has stifled the launch in Korea of ride-sharing services which are readily available even in communist China and Vietnam. The truth is that the Moon Jae-in administration is afraid of losing votes and can be expected to resist any innovative ideas that could shake up established industries for the rest of its five-year term. That means falling another three years behind other countries, which pretty much equals eternity in the high-tech industry.

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